Use the Information for the Question(s)below

question 46

Multiple Choice

Use the information for the question(s) below.
Assume that you are 30 years old today and that you are planning on retirement at age 65.Your current salary is $45,000 and you expect your salary to increase at a rate of 5% per year as long as you work.To save for your retirement,you plan on making annual contributions to a retirement account.Your first contribution will be made on your 31st birthday and will be 8% of this year's salary.Likewise,you expect to deposit 8% of your salary each year until you reach age 65.Assume that the rate of interest is 7%.
-The future value at retirement (age 65) of your savings is closest to:

• A)$497,530.
• B)$928,895.
• C)$1,263,236.
• D)$108,000.

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Definitions:

Free-Rider Problem

A situation where individuals consume a good or service without contributing to its cost, often leading to underprovision of that good.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they can be used simultaneously by more than one person without diminishing availability to others.

Location Subsidies

Financial incentives provided by governments to encourage businesses to establish operations in specific areas, often to stimulate economic growth.

Tax Breaks

Financial incentives or reductions in tax liabilities, intended to encourage certain activities or investments.