Shah Sets Aside $2,000 Each Year for Five Years

question 63

Multiple Choice

Shah sets aside $2,000 each year for five years. After five years, he then withdraws the funds on an equal annual basis for the next four years. If Shah wishes to determine the amount of the annuity to be withdrawn in years 6 through 9, he should use the following two tables in this order:

• A) present value of an annuity of $1; future value of an annuity of $1
• B) future value of an annuity of $1; present value of an annuity of $1
• C) future value of an annuity of $1; present value of $1
• D) future value of an annuity of $1; future value of $1

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Definitions:

Current Ratio

An indicator of a company's proficiency in paying off its short-term dues using the assets it currently possesses.

Debt-to-equity Ratio

A financial benchmark indicating the proportional use of debt and equity in the financing strategy for a company's assets.

Times Interest Earned Ratio

A financial metric assessing a company's ability to meet its interest obligations from operating earnings.

Inventory Turnover

A measure of how quickly a company sells its stock of goods in a period, calculated by dividing the cost of goods sold by the average inventory level.