You Want to Have $1 Million in Your Savings Account

question 8

Multiple Choice

You want to have $1 million in your savings account when you retire.You plan on investing a single lump sum today to fund this goal.You are planning on investing in an account which will pay 7.5 percent annual interest.Which of the following will reduce the amount that you must deposit today if you are to have your desired $1 million on the day you retire?
I.Invest in a different account paying a higher rate of interest.
II.Invest in a different account paying a lower rate of interest.
III.Retire later.
IV.Retire sooner.

• A)I only
• B)II only
• C)I and III only
• D)I and IV only
• E)II and III only

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Definitions:

Alternative Hypotheses

A statement that directly contradicts the null hypothesis, suggesting that there is a significant difference or effect.

Population Mean

The average value of all the members of a population.

F Table

A table used in statistics to determine the critical values of the F-distribution, useful in analysis of variance (ANOVA).

Degrees Of Freedom

The number of independent values or quantities which can be assigned to a statistical distribution, often associated with the number of independent pieces of information available to assess a parameter or fit a model.