Solve the Problem

question 27

Multiple Choice

Solve the problem. Round to the nearest cent as needed.
-Cheraw Auto Repair believes that it will need new equipment in 10 years. The equipment will cost $26,000. What lump sum should be invested today at 8% compounded semiannually, to yield $26,000?

• A) $21,097.18
• B) $17,462.98
• C) $11,866.06
• D) $17,637.61

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Definitions:

Behavioral Economics Research

Behavioral economics research studies the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions and how those decisions vary from those implied by classical theory.

Anchoring Effect

A mental shortcut in which a person gives excessive weight to the first piece of information they receive (known as the "anchor") during decision-making processes.

Minimum Required Payment

The lowest amount that must be paid on an outstanding debt, such as a credit card bill, to avoid penalties.

Credit Card Companies

Financial institutions or corporations that issue credit cards to consumers, facilitating electronic payments and extending credit.