The Solution to This Problem Requires Time Value of Money

question 130

Multiple Choice

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
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Pablos wants to save some money so that he can make a down payment of $3,000 on a car when he graduates from college four years from now.If he opens a savings account and earns 3% on his money,compounded annually,how much will he have to invest now?

• A)$2,520
• B)$2,664
• C)$2,910
• D)$3,000

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Definitions:

Fundamental Analysis

A method of evaluating securities by attempting to measure the intrinsic value of a stock through examination of related economic, financial, and other qualitative and quantitative factors.

Technical Analysis

An approach to valuing securities by examining past patterns of price and volume. The technique is based on the idea that such patterns repeat themselves.

Preferred Stock

is a type of stock that provides a specific dividend that is paid before any dividends are paid to common stock holders, and typically does not have voting rights.

Periodic Payments

Recurring payments made over a period of time, such as monthly mortgage or insurance payments.