The Solution to This Problem Requires Time Value of Money

question 76

Multiple Choice

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Mackie's individual retirement account (IRA) currently has a balance of $100,000 and is earning 6%.Beginning one year from today, what equal annual amounts can be withdrawn from the IRA for 10 years so that the balance after the tenth withdrawal is zero?

• A) $10,000
• B) $12,950
• C) $13,587
• D) $14,237

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Definitions:

Validity Effect

The phenomenon where a belief or a statement is more likely to be accepted as true the more it is repeated or encountered, regardless of its actual validity.

Exposure Effect

The psychological phenomenon where repeated exposure to a stimulus increases an individual's preference for that stimulus.

Contrast Effect

A psychological phenomenon wherein the perception or judgment of something is influenced by the comparison with something else, often leading to exaggeration of differences.

Appeal to Fear

A persuasive technique that attempts to influence people’s behavior by making them feel afraid of the consequences of not taking a particular action.