Present Value: Becky Sayers Wants to Buy a House in Six

question 94

Multiple Choice

Present value: Becky Sayers wants to buy a house in six years. She hopes to be able to put down $25,000 at that time. If the bank CD she wants to invest in will pay 7.5 percent annually, how much will she have to invest today? (Round to the nearest dollar.)

• A) $18,472
• B) $13,987
• C) $16,199
• D) $23,256

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Definitions:

Reward Program

A program offered by a company to customers who frequently make purchases, designed to encourage ongoing business by offering benefits or rewards.

Employee

Individual hired by a company or another person to conduct tasks, services or jobs for compensation.

Deposit Today

The act of placing money into a financial account or investment at the current date.

Discount Rate

The interest rate used to discount future cash flows to their present value, essential in the valuation of investments and projects.