Xiao Xin Is Planning to Accumulate $40,000 by the End

question 66

Multiple Choice

Xiao Xin is planning to accumulate $40,000 by the end of 5 years by making 5 equal annual deposits. If she plans to make her first deposit today and can earn an annual compound rate of 9 percent on her investment, how much must each deposit be in order to accumulate the $40,000?

• A) $ 6,132
• B) $ 6,684
• C) $23,844
• D) $ 9,434

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Definitions:

Federal Withholding

The process by which an employer deducts a portion of an employee's income and pays it directly to the government as an advance payment of the employee's tax liability.

FICA

Federal Insurance Contributions Act, the U.S. law that requires a payroll tax on both employees and employers to fund Social Security and Medicare.

FICA Taxes

Federal Insurance Contributions Act taxes, funding Social Security and Medicare, deducted from employee paychecks and matched by employers.

Federal Income Tax

A tax levied by the U.S. federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.