You Borrowed $50,000 Which You Must Repay in 10 Years

question 65

Multiple Choice

You borrowed $50,000 which you must repay in 10 years.You plan to make an initial deposit today,then make 9 more deposits at the beginning of each the next 9 years,but with the deposits increasing at the inflation rate.You expect to earn 5% on your funds,and you expect a 3% inflation rate.To the nearest dollar,how large must your initial deposit be to enable you to reach your $50,000 target?

• A) $3,008
• B) $3,342
• C) $3,676
• D) $4,044
• E) $4,448

---

Definitions:

Strike Prices

The predetermined prices at which the holder of an option can buy (call option) or sell (put option) the underlying asset.

Exercise Price

The Exercise Price, also known as the strike price, is the price at which the holder of an option contract can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset or security.

Risk-Free Rate

The hypothetical rate of return on an investment with no risk of financial loss, often represented by the yield on government securities.

Variance

Variance is a statistical measure used to determine the dispersion of data points in a data set relative to its mean, indicating how much the data points differ from the average.