A Home Improvement Firm Has Quoted a Price of $9,800

question 87

Multiple Choice

A home improvement firm has quoted a price of $9,800 to fix up John's backyard. Five years ago, John put $7,500 into a home improvement account that has earned an average of 5.25% per year. Does John have enough money in his account to pay for the backyard fix-up?

• A) Yes; John now has exactly $9,800 in his home improvement account.
• B) No; John has only $9,687 in his home improvement account.
• C) Yes; John now has $10,519 in his home improvement account.
• D) There is not enough information to answer this question.

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Definitions:

Extent of Influence

Refers to the degree to which an investor can sway management decisions and operational policies of an investee due to ownership level or other factors.

Common Stock

A type of securities that represents ownership in a corporation, granting holders voting rights and a share in the company’s profits via dividends.

Equity Method

An accounting technique used by firms to assess the profits earned by their investments in other companies and to reflect this in the profit and loss statement proportionally to their ownership level.