(Appendix 8A)(Ignore Income Taxes in This Problem

question 5

Multiple Choice

(Appendix 8A) (Ignore income taxes in this problem. ) How much would you have to invest today in the bank at an interest rate of 5% to have an annuity of $1, 400 per year for 5 years, with nothing left in the bank at the end of the 5 years? Select the amount below that is closest to your answer.

• A)$6, 667
• B)$6, 061
• C)$7, 000
• D)$1, 098

---

Definitions:

Price Elasticity

A metric that shows the responsiveness of the quantity of a product demanded when its price changes.

Quantity Demanded

The amount of a good or service that consumers are willing and able to purchase at a given price.

Price Elasticity

An indicator of how the amount of a product that is bought or provided reacts to variations in its cost.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price in a particular period.