Your Goal Is to Be Able to Withdraw $5,000 for Each

question 79

Multiple Choice

Your goal is to be able to withdraw $5,000 for each of the next ten years beginning one year from today. The return on the investment is expected to be 12%. The amount that needs to be invested today is closest to:

• A)$44,645.
• B)$36,291.
• C)$28,251.
• D)$50,000.

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Definitions:

Expected Rate of Return

The anticipated return on an investment, calculated as the average of probable returns weighted by their likelihood.

CSCO

An abbreviation for Cisco Systems, Inc., a multinational technology conglomerate known for its networking hardware, software, and telecommunications equipment.

IRR Method

The Internal Rate of Return method, a capital budgeting technique used to evaluate and compare the profitability of investments or projects.

Hurdle Rate

The minimum rate of return on an investment required by a manager or investor.