Paul Springer Plans to Save for a Down Payment for a House

question 19

Multiple Choice

Paul Springer plans to save for a down payment for a house in 10 years. He will be able to invest $12,000 today in a money market account that will pay him an interest of 5.50 percent on a monthly basis. How much will he have at the end of 10 years?

• A) $12,640
• B) $20,773
• C) $24,859
• D) $23,080

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Definitions:

Bond Sinking Fund

A method employed by issuers of bonds to set aside money over time to retire their debt at maturity.

Retired Immediately

A term typically referring to the full settlement or pay off of an obligation or liability at the time of its maturity.

Carrying Value

The book value of an asset on a company's balance sheet, calculated as the original cost minus accumulated depreciation or amortization.

Semiannual Interest

Interest calculated and paid twice a year on an investment or loan.