Bill and Cathy Will Be Retiring in Fifteen Years and Would

question 97

Multiple Choice

Bill and Cathy will be retiring in fifteen years and would like to buy an Italian villa.The villa costs $500,000 today,and housing prices in Italy are expected to increase by 6% per year.Bill and Cathy want to make fifteen equal annual payments into an account,starting today,so there will be enough money to purchase the villa in fifteen years.If the account earns 10% per year,what is the amount of each deposit?

• A) $79,885
• B) $72,623
• C) $34,286
• D) $32,947

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Definitions:

Savings

Money that is set aside from one's income or earnings for future use, often accumulating interest.

Saving

The portion of income that is not spent on immediate consumption but is set aside for future use, often in investments or deposits.

Disposable Income

The available amount for households to spend and save, subsequent to income tax deductions.

Autonomous Consumption

The level of consumption that occurs when income is zero, representing the expenditures that consumers must make even when they have no income.