A Car's Price Is Currently $20,000 and Is Expected to Rise

question 61

Multiple Choice

A car's price is currently $20,000 and is expected to rise by 4% a year.If the interest rate is 6%,how much do you need to put aside today to buy the car one year from now?

• A) $18,182
• B) $19,231
• C) $19,623
• D) $4,080.08

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Definitions:

Debt/Equity Ratio

This ratio demonstrates the equity to debt proportion in the context of financing company assets.

Market Risk Premium

The additional return expected by investors for taking on the higher risk of investing in the stock market over a risk-free asset.