Adrian Is a Single Man and Wants to Save Up

question 54

Multiple Choice

Adrian is a single man and wants to save up enough money to put as a down payment on a new house in 5 years. He has read that the best way to purchase a house is with a 20% down payment. He has a large income and very little debt right now so he can afford to save a substantial amount of money every month. He is asking you for some advice to help him reach his goal.
-Assume that Adrian will need $30,000 for his 20% downpayment in 5 years. Which of the following is closest to the amount that he will have to save every year in an investment that pays 9%, compounded annually?

• A) $6,003
• B) $4,884
• C) $5,187
• D) $5,013

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Definitions:

Financial Reports

Documents that provide an overview of a company's financial condition, including balance sheets, income statements, and cash flow statements.

Dividends Account

A dividends account is used in accounting to track dividends paid out to shareholders during a specific period; it represents a distribution of a portion of a company's earnings.

Time Period Assumption

An accounting principle that assumes a business's complex and ongoing activities can be divided into specific time periods such as months, quarters, or years for reporting purposes.

Reporting Time Periods

The specific intervals for which financial reports are prepared, such as quarterly or annually, to provide stakeholders with timely financial information.