What Effective Annual Rate of Return (EAR) Would Rayne Need

question 161

Multiple Choice

What effective annual rate of return (EAR) would Rayne need to earn if she deposits $1,000 per month into an account beginning one month from today in order to have a total of $1,000,000 in 30 years?

• A) 5.98%
• B) 6.55%
• C) 4.87%
• D) 6.14%

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Definitions:

Profit-Maximizing Output

The level of production at which a business achieves the highest possible profit, balancing costs against revenues.

Cost Function

A mathematical relation that describes how production costs vary with changes in the quantity of output produced.

Profit-Maximizing Output

The quantity of production that generates the highest possible profit for a firm, determined by the intersection of marginal cost and marginal revenue.

Price Equals Marginal Cost

This principle suggests that in a competitive market, firms set prices equal to their marginal cost of production, achieving economic efficiency.