A Small Foundry Agrees to Pay $250,000 Two Years from Now

question 98

Multiple Choice

A small foundry agrees to pay $250,000 two years from now to a supplier for a given amount of coking coal.The foundry plans to deposit a fixed amount in a bank account every three months,starting three months from now,so that at the end of two years the account holds $250,000.If the account pays 5.5% APR compounded monthly,how much must be deposited every three months?

• A)$29,770
• B)$29,777
• C)$29,740
• D)$31,250

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Definitions:

Rate of Return

Outcomes in terms of profit or loss on an investment during a defined period, voiced as a percentage of the investment’s initial pricing.

Investor's Return

The upward or downward financial impact on an investment within a specific period, quantified as a percentage of the investment’s outset cost.

Expected to Be

A phrase indicating the anticipation or belief that something will occur or be the case in the future.

Market Rate of Return

The average rate of return expected by investors in a particular market, based on historical or anticipated investment performance.