Jason's Opportunity Cost Rate Is 8 Percent Compounded Annually

question 19

Multiple Choice

Jason's opportunity cost rate is 8 percent compounded annually. How much must he deposit in an account today if he wants to receive $5,400 at the end of each of the next 10 years?

• A)$32,625
• B)$34,852
• C)$36,234
• D)$38,996
• E)$40,252

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Definitions:

Compounded Quarterly

A method of calculating interest where the interest earned each quarter is added to the principal, so that the balance doesn’t merely grow, it grows at an increasing rate.

Guaranteed Pay

An employment compensation structure where an employee is assured a specific amount of payment, regardless of performance or company profit.

Credit Union

A member-owned financial cooperative that provides traditional banking services, often with more favorable terms.

Compound Interest

Interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.