The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
If Garrett has $5,000 per year to invest for 10 years and wants to accumulate $87,745 at the end of that time, he must find an investment that is earning at a rate of
A)15%
B)12%
C)11%
D)6%

Question

Quizplus · Accepted Answer

To find the rate, we need to determine which interest rate allows $5,000 invested annually for 10 years to grow to $87,745. Using the future value of an annuity table (Table 9-4), we find that at 12%, the future value factor for 10 years is approximately 17.549, which when multiplied by $5,000 gives $87,745.

The Solution to This Problem Requires Time Value of Money