Jude Wants to Receive $1,100 at the Beginning of Each

question 21

Multiple Choice

Jude wants to receive $1,100 at the beginning of each of the next eight years. If his opportunity cost rate is 9 percent compounded annually, how much must he deposit in an account today? Use a financial calculator to make the calculation. 

• A)$6,088
• B)$7,086
• C)$6,874
• D)$6,636
• E)$6,420

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Definitions:

Annual Amortization

The process of gradually writing off the initial cost of an asset over a period typically corresponding to the asset's useful life.

Investment Balance

The current value of all the investments held by an individual or entity.

Initial Value Method

The initial value method is an accounting approach where investments are recorded at their acquisition cost without subsequent adjustment for changes in market value.

Dividends Received

Dividends Received refers to the payments a shareholder gets from a corporation or a fund as a return on investment.