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.
-
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

---

Definitions:

Monopolistically Competitive

A monopolistically competitive market is characterized by many sellers offering products that are similar but not identical, allowing for competition on factors other than just price, such as quality, brand, or features.

Four-Firm Concentration Ratio

A metric assessing the concentration of market power by adding the market shares of the four largest firms in an industry.

Pure Competition

A market structure characterized by a large number of small firms, a homogeneous product, perfect information, and easy entry and exit, leading to price-taking behavior.

Pure Monopoly

A market structure where a single seller exclusively provides a product or service with no close substitutes, controlling the entire market supply.