The Solution to This Problem Requires Time Value of Money

question 47

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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Josh and Sara want to buy a house in four years.If the house will cost $180,000,how much must they deposit at the end of every year for the next four years at 5% compounded annually in order to buy the house?

• A)$32,040
• B)$36,990
• C)$41,763
• D)$45,000

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Definitions:

Equilibrium Price

The market price at which the quantity of a good demanded equals the quantity supplied, leading to no excess supply or shortage.

Abolished

Refers to formally putting an end to a system, practice, or institution.

Government Involvement

Refers to the activities and interventions by the government in the market to regulate or support economic operations and social policies.

Wages

Wages refer to the fixed regular payment, typically calculated on a hourly, daily, or piecework basis, made by an employer to an employee.