How Much Must Be Deposited Today in an Account Earning

question 108

Multiple Choice

How much must be deposited today in an account earning 6 percent annually to accumulate a 20 percent down payment to use in purchasing a car one year from now, assuming that the car's current price is $20,000, and inflation will be 4 percent?

• A)$3,774
• B)$3,782
• C)$3,925
• D)$4,080 Need $20,800 x .2 = $4,160
• PV = $4,160/(1.06)

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Definitions:

Hypothesis

An assumption or proposed explanation made on the basis of limited evidence as a starting point for further investigation.

Ferris State University

A public university located in Big Rapids, Michigan, known for its comprehensive educational programs.

Chi-Square Distributions

A statistical distribution that is used to assess how likely it is that an observed distribution is due to chance, especially useful for categorical data.

Skewed to the Right

A distribution where the tail on the right side of the histogram is longer or fatter than the left side.