Deck 4: The Time Value of Money

Question 1

Suppose you invest $1,000 into a mutual fund that is expected to earn a rate of return of 10%.The amount of money will you have in 10 years is closest to which of the following? The amount you will have in 50 years is closest to which of the following?

A) $386; $9
B) $2,594; $45,259
C) $2,594; $117,391
D) $3,138; $ 1,311,892

Answer 1

$2,594; $117,391

Question 2

Use the information for the question(s) below.
Joe just inherited the family business, and having no desire to run the family business, he has decided to sell it to an entrepreneur. In exchange for the family business, Joe has been offered an immediate payment of $100,000. Joe will also receive payments of $50,000 in one year, $50,000 in two years, and $75,000 in three years. The current market rate of interest for Joe is 6%.
Draw a timeline detailing Joe's cash flows from the sale of the family business.

Answer 2

Question 3

Which of the following statements is false?

A) The process of moving a value or cash flow forward in time is known as compounding.
B) The effect of earning interest on interest is known as compound interest.
C) It is only possible to compare or combine values at the same point in time.
D) A dollar in the future is worth more than a dollar today.

Answer 3

A dollar in the future is worth more than a dollar today.

Question 4

Consider the following timeline: If the current market rate of interest is 7%,then the future value of this timeline as of year 3 is closest to:

A) $2,100
B) $2,013
C) $1,720
D) $1,893

Question 5

When a value or a cash flow is compounded or discounted,the value or cash flow will have

A) linear growth.
B) exponential growth.
C) constant growth.
D) percentage growth.

Question 6

Which of the following statements is false?

A) The process of moving a value or cash flow backward in time is known as discounting.
B) FV =
C) The process of moving a value or cash flow forward in time is known as compounding.
D) The value of a cash flow that is moved forward in time is known as its future value.

Question 7

Which of the following statements is false?

A) Finding the present value and compounding are the same.
B) A dollar today and a dollar in one year are not equivalent.
C) If you want to compare or combine cash flows that occur at different points in time, you first need to convert the cash flows into the same units or move them to the same point in time.
D) The equivalent value of two cash flows at two different points in time is sometimes referred to as the time value of money.

Question 8

Use the figure for the question(s) below.
Which of the following statements regarding the timeline is false?

A) Date 1 is one year from now.
B) The $5,000 below date 1 is the payment you will receive at the end of the first year.
C) The $5,000 below date 2 is the payment you will receive at the beginning of the second year.
D) Date 0 represents today.

Question 9

When you compare or combine cash flows,you can only compare or combine them

A) at different present time points.
B) at one time point.
C) at different future time points.
D) none of the above.

Question 10

Consider the following timeline: If the current market rate of interest is 10%,then the future value at time 3 on this timeline is closest to:

A) $666
B) $500
C) $605
D) $650

Question 11

Use the table for the question(s) below.

Draw a timeline detailing the cash flows from investment "B."

Question 12

Use the figure for the question(s) below.
Which of the following statements regarding timelines is false?

A) Timelines are an important first step in organizing and then solving a financial problem.
B) We refer to a series of cash flows lasting several periods as a stream of cash flows.
C) Not every stream of cash flows can be represented on a timeline.
D) A timeline is a linear representation of the timing of the (expected) cash flows.

Question 13

In cash flow calculations,cash flow sign convention requires us to

A) assign a positive sign in front of cash inflows and a negative sign in front of cash outflows.
B) assign a negative sign in front of cash inflows and a positive sign in front of cash outflows.
C) assign a positive sign in front of both cash inflows and cash outflows.
D) assign no signs. None of the cash flows need signs assigned to them.

Question 14

Consider the following timeline: If the current market rate of interest is 12%,then the present value of the cash flows is closest to:

A) $20.67
B) $320.67
C) -$20.67
D) $70.00

Question 15

Use the information for the question(s) below.
Joe just inherited the family business, and having no desire to run the family business, he has decided to sell it to an entrepreneur. In exchange for the family business, Joe has been offered an immediate payment of $100,000. Joe will also receive payments of $50,000 in one year, $50,000 in two years, and $75,000 in three years. The current market rate of interest for Joe is 6%.
You have been offered the following investment opportunity: if you pay $2,500 today,you will receive $1,000 at the end of each of the next three years.Draw a timeline detailing this investment opportunity.

Question 16

It has long been told that the Dutch purchased Manhattan island in 1,626 for the value of 60 guilders ($24).Assuming that the Dutch invested this money into an account earning 5%,approximately how much would their investment be worth 380 years later in 2006?

A) $2.7 billion
B) $3.1 billion
C) $4.5 billion
D) $1.9 trillion

Question 17

When money or cash flow moves forward in time,the money or cash flows could be compounded

A) monthly.
B) semiannually.
C) quarterly.
D) all of the above.

Question 18

Consider the following timeline: If the current market rate of interest is 8%,then the present value of this timeline is closest to:

A) $1,000
B) $857
C) $860
D) $926

Question 19

Use the table for the question(s) below.

Draw a timeline detailing the cash flows from investment "A."

Question 20

Use the figure for the question(s) below.
Which of the following statements regarding the timeline is false?

A) Date 1 is the end of the first year.
B) Date 0 is the beginning of the first year.
C) The space between date 0 and date 1 represents the time period between two specific dates.
D) You will find the timeline most useful in tracking cash flows if you interpret each point on the timeline as a period or interval of time.

Question 21

Use the information for the question(s) below.
Joe just inherited the family business, and having no desire to run the family business, he has decided to sell it to an entrepreneur. In exchange for the family business, Joe has been offered an immediate payment of $100,000. Joe will also receive payments of $50,000 in one year, $50,000 in two years, and $75,000 in three years. The current market rate of interest for Joe is 6%.
In terms of present value,how much will Joe receive for selling the family business?

Question 22

Consider the following timeline: If the current market rate of interest is 9%,then the present value of this timeline as of year 0 is closest to:

A) $492
B) $637
C) $600
D) $400

Question 23

Use the table for the question(s) below.

If the interest rate is 6%,then the NPV of investment "B" is closest to:

A) $84
B) -$32
C) $43
D) $9

Question 24

Consider the following timeline detailing a stream of cash flows: If the current market rate of interest is 8%,then the future value of this stream of cash flows is closest to:

A) $11,699
B) $10,832
C) $12,635
D) $10,339

Question 25

Use the information for the question(s) below.
Joe just inherited the family business, and having no desire to run the family business, he has decided to sell it to an entrepreneur. In exchange for the family business, Joe has been offered an immediate payment of $100,000. Joe will also receive payments of $50,000 in one year, $50,000 in two years, and $75,000 in three years. The current market rate of interest for Joe is 6%.
You have been offered the following investment opportunity: if you pay $2,500 today,you will receive $1,000 at the end of each of the next three years.Assuming that you could otherwise earn 10% per year on your money,the NPV for this opportunity is closest to:

A) $12
B) $18
C) -$13
D) $500

Question 26

When money moves forward on the timeline,the money should be

A) discounted with the given rate of interest.
B) compounded with the given rate of interest.
C) multiplied with the given rate of interest.
D) none of the above

Question 27

Consider the following timeline detailing a stream of cash flows: If the current market rate of interest is 8%,then the present value of this stream of cash flows is closest to:

A) $22,871
B) $21,211
C) $24,074
D) $26,000

Question 28

Use the information for the question(s) below.
Joe just inherited the family business, and having no desire to run the family business, he has decided to sell it to an entrepreneur. In exchange for the family business, Joe has been offered an immediate payment of $100,000. Joe will also receive payments of $50,000 in one year, $50,000 in two years, and $75,000 in three years. The current market rate of interest for Joe is 6%.
Suppose a second entrepreneur approaches Joe and offers him $250,000 today for the business.Should Joe accept the new entrepreneur's offer or stick with the original offer of $100,000 and the series of payments over three years? Why?

Question 29

Use the information for the question(s) below.
Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child's university education. Currently university tuition, books, fees, and other costs average $12,500 per year. On average, tuition and other costs have historically increased at a rate of 4% per year.
Assume that university costs continue to increase an average of 4% per year and that all their child's university savings are invested in an account paying 7% interest.Draw a timeline that details the amount of money their child will need to have in the future for each of the four years of their child's undergraduate education (assuming that their child begins university at age 18).

Question 30

Consider the following timeline detailing a stream of cash flows: If the current market rate of interest is 10%,then the present value of this stream of cash flows is closest to:

A) $674
B) $600
C) $460
D) $287

Question 31

When money moves backward on the timeline,the money should be

A) divided by the given rate of interest.
B) subtracted from its future value.
C) compounded with the given rate of interest.
D) discounted with the given rate of interest.

Question 32

Consider the following timeline detailing a stream of cash flows: If the current market rate of interest is 6%,then the future value of this stream of cash flows is closest to:

A) $1,723
B) $1,500
C) $1,626
D) $1,288

Question 33

Consider the following timeline: If the current market rate of interest is 8%,then the value as of year 1 is closest to:

A) $0
B) $1,003
C) $540
D) $77

Question 34

Using an Excel spreadsheet to calculate net present value (NPV)has an advantage over using a financial calculator because

A) the spreadsheet retains the full precision of all non-rounded numbers while the calculator will cumulate rounding errors.
B) not all financial calculators compute NPV using the same parameters.
C) financial calculators cannot differentiate between payments made immediately or payments deferred by one period.
D) financial calculators cannot solve when the unknown is other than NPV (e.g.: NPV given, solve for the interest rate).

Question 35

Which of the following statement is correct?

A) The present value of any future cash flow stream is a sum of present values of each cash flow in the stream.
B) The present value of any future cash flow stream is a sum of future values of each cash flow in the stream.
C) The present value of any future cash flow stream is a sum of the values of each cash flow in the stream.
D) None of the above

Question 36

Which of the following statements is false?

A) FV =
B) PV =

C) FV = C_n × (1 + r)^N-n
D) Most investment opportunities have multiple cash flows that occur at different points in time.

Question 37

Use the information for the question(s) below.
Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child's university education. Currently university tuition, books, fees, and other costs average $12,500 per year. On average, tuition and other costs have historically increased at a rate of 4% per year.
Suppose that a young couple has just had their first baby and they wish to insure that enough money will be available to pay for their child's university education.They decide to make deposits into an educational savings account on each of their child's birthdays,starting with the first birthday.Assume that the educational savings account will return a constant 7%.The parents deposit $2,000 on their child's first birthday and plan to increase the size of their deposits by 5% each year.Draw a timeline that details the amounts that will be deposited into the account up to and including their child's 18th birthday.

Question 38

Use the table for the question(s) below.

If the interest rate is 6%,then the NPV of investment "A" is closest to:

A) $70
B) $43
C) -$32
D) $9

Question 39

Which of the following statements regarding perpetuities is false?

A) To find the value of a perpetuity one cash flow at a time would take forever.
B) A perpetuity is a stream of equal cash flows that occur at regular intervals and lasts forever.
C) PV of a perpetuity =
D) One example of a perpetuity is the British government bond called a consol.

Question 40

Use the table for the question(s) below.

If the interest rate is 10%,then which investment(s),if any,would you take and why?

Question 41

Consider a growing perpetuity that will pay $100 in one year.Each year after that,you will receive a payment on the anniversary of the last payment that is 6% larger than the last payment.This pattern of payments will continue forever.If the interest rate is 11%,then the value of this perpetuity is closest to:

A) $1,667
B) $588
C) $2,000
D) $909

Question 42

Use the information for the question(s) below.
Assume that you are 30 years old today, and that you are planning on retirement at age 65. Your current salary is $45,000 and you expect your salary to increase at a rate of 5% per year as long as you work. To save for your retirement, you plan on making annual contributions to a retirement account. Your first contribution will be made on your 31st birthday and will be 8% of this year's salary. Likewise, you expect to deposit 8% of your salary each year until you reach age 65. Assume that the rate of interest is 7%.
The future value at retirement (age 65)of your savings is closest to:

A) $497,530
B) $928,895
C) $1,263,236
D) $108,000

Question 43

Which of the following formulas is incorrect?

A) PV of a growing annuity = C ×

B) PV of an annuity = C ×

C) PV of a growing perpetuity =
D) PV of a perpetuity =

Question 44

Use the information for the question(s) below.
Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child's university education. Currently university tuition, books, fees, and other costs average $12,500 per year. On average, tuition and other costs have historically increased at a rate of 4% per year.
Assuming that university costs continue to increase an average of 4% per year and that all her university savings are invested in an account paying 7% interest,then the amount of money she will need to have available at age 18 to pay for all four years of her undergraduate education is closest to:

A) $97,110
B) $107,532
C) $101,291
D) $50,000

Question 45

The British government has a consol bond outstanding that pays ₤100 in interest each year.Assuming that the current interest rate in Great Britain is 5% and that you will receive your first interest payment one year from now,then the value of the consol bond is closest to:

A) ₤1,000
B) ₤1,100
C) ₤2,100
D) ₤2,000

Question 46

The British government has a consol bond outstanding that pays ₤100 in interest each year.Assuming that the current interest rate in Great Britain is 5% and that you will receive your first interest payment immediately upon purchasing the consol bond,then the value of the consol bond is closest to:

A) ₤2,000
B) ₤2,100
C) ₤1,000
D) ₤1,100

Question 47

Use the information for the question(s) below.
Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child's university education. Currently university tuition, books, fees, and other costs average $12,500 per year. On average, tuition and other costs have historically increased at a rate of 4% per year.
Assuming that costs continue to increase an average of 4% per year,tuition and other costs for one year for this student in 18 years when she enters university will be closest to:

A) $12,500
B) $21,500
C) $320,568
D) $25,323

Question 48

If the current rate of interest is 8%,then the present value of an investment that pays $1,000 per year and lasts 20 years is closest to:

A) $18,519
B) $45,761
C) $9,818
D) $20,000

Question 49

If the current rate of interest is 8%,then the future value 20 years from now of an investment that pays $1,000 per year and lasts 20 years is closest to:

A) $45,761
B) $36,725
C) $9,818
D) $93,219

Question 50

A Canadian company issues an 8-year term bond with face value of $1,000 and 6% coupon rate.If the market prevailing effective rate of interest is 5.75%,what is the price an investor will have to pay? Note: The bond pays a $60 coupon (or interest)payment at the end of each of the 8 years and pays the face value at the end of the 8 years.

A) $1,015.85
B) $1,200.00
C) $1,150.00
D) $1,215.00

Question 51

Which of the following statements is false?

A) The difference between an annuity and a perpetuity is that an annuity ends after some fixed number of payments.
B) Most car loans, mortgages, and some bonds are annuities.
C) A growing perpetuity is a cash flow stream that occurs at regular intervals and grows at a constant rate forever.
D) An annuity is a stream of N equal cash flows paid at irregular intervals.

Question 52

Which of the following statements regarding annuities is false?

A) PV of an annuity = C ×

B) The difference between an annuity and a perpetuity is that a perpetuity ends after some fixed number of payments.
C) An annuity is a stream of N equal cash flows paid at regular intervals.
D) Most car loans, mortgages, and some bonds are annuities.

Question 53

Which of the following statements regarding growing perpetuities is false?

A) We assume that r < g for a growing perpetuity.
B) PV of a growing perpetuity =
C) To find the value of a growing perpetuity one cash flow at a time would take forever.
D) A growing perpetuity is a cash flow stream that occurs at regular intervals and grows at a constant rate forever.

Question 54

Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child's university education.They decide to make deposits into an educational savings account on each of their daughter's birthdays,starting with her first birthday.Assume that the educational savings account will return a constant 7%.The parents deposit $2,000 on their daughter's first birthday and plan to increase the size of their deposits by 5% each year.Assuming that the parents have already made the deposit for their daughter's 18th birthday,then the amount available for the daughter's university expenses on her 18th birthday is closest to:

A) $42,825
B) $97,331
C) $67,998
D) $103,063

Question 55

Since your first birthday,your grandparents have been depositing $1,000 into a savings account on every one of your birthdays.The account pays 4% interest annually.Immediately after your grandparents make the deposit on your 18th birthday,the amount of money in your savings account will be closest to:

A) $25,645
B) $36,465
C) $12,659
D) $18,000

Question 56

Use the information for the question(s) below.
Assume that you are 30 years old today, and that you are planning on retirement at age 65. Your current salary is $45,000 and you expect your salary to increase at a rate of 5% per year as long as you work. To save for your retirement, you plan on making annual contributions to a retirement account. Your first contribution will be made on your 31st birthday and will be 8% of this year's salary. Likewise, you expect to deposit 8% of your salary each year until you reach age 65. Assume that the rate of interest is 7%.
The present value (at age 30)of your retirement savings is closest to:

A) $87,000
B) $108,000
C) $46,600
D) $75,230

Question 57

Which of the following statements regarding growing annuities is false?

A) A growing annuity is a stream of N growing cash flows, paid at regular intervals.
B) We assume that g < r when using the growing annuity formula.
C) PV of a growing annuity = C ×

D) A growing annuity is like a growing perpetuity that never comes to an end.

Question 58

After many years teaching finance at Capilano University,Allen wants to establish a scholarship to offer 4 $1,000 awards each year to students whose performance is excellent in finance courses.If the university can negotiate a 12.75% effective interest rate,at least how much does Allen need to endorse over to the scholarship (closest estimate)?

A) $32,000
B) $31,000
C) $31,500
D) $32,500

Question 59

You are thinking about investing in a mine that will produce $10,000 worth of ore in the first year.As the ore closest to the surface is removed it will become more difficult to extract the ore.Therefore,the value of the ore that you mine will decline at a rate of 8% per year forever.If the appropriate interest rate is 6%,then the value of this mining operation is closest to:

A) $71,429
B) $500,000
C) $166,667
D) This problem cannot be solved.

Question 60

Mr.Zhu is selling his business for retirement.It is expected that the cash flows from his business in each of next 5 years will be $500,000.At the end of the 5 years,the residual value of the business is expected to be $8 million.Mr.Zhu has his expected rate of return of 12.0% .What could be the closest estimate to his "fair market value" (of similar business)at which he would be willing to sell his business?

A) $6.34 million
B) $6.00 million
C) $5.80 million
D) $6.50 million

Question 61

Your son is about to start kindergarten in a private school.Currently,the tuition is $12,000 per year,payable at the end of the school year.You expect annual tuition increases to average 6% per year over the next 13 years.Assuming that your son remains in this private school through high school and that your current interest rate is 7%,then the present value of your son's private school education is closest to:

A) $332,300
B) $137,900
C) $155,800
D) $156,000

Question 62

Use the information for the question(s) below.
Assume that you are 30 years old today, and that you are planning on retirement at age 65. Your current salary is $45,000 and you expect your salary to increase at a rate of 5% per year as long as you work. To save for your retirement, you plan on making annual contributions to a retirement account. Your first contribution will be made on your 31st birthday and will be 8% of this year's salary. Likewise, you expect to deposit 8% of your salary each year until you reach age 65. Assume that the rate of interest is 7%.
The future value at retirement (age 65)of your savings is:

Question 63

Your son is about to start kindergarten in a private school.Currently,the tuition is $12,000 per year,payable at the start of the school year.You expect annual tuition increases to average 6% per year over the next 13 years.Assuming that you son remains in this private school through high school and that your current interest rate is 6%,then the present value of your son's private school education is closest to:

A) $106,230
B) $156,000
C) $137,900
D) This problem cannot be solved.

Question 64

You are considering purchasing a new home.You will need to borrow $250,000 to purchase the home.A mortgage company offers you a 15 year fixed rate mortgage (180 months)at 9% APR (0.75% month).If you borrow the money from this mortgage company,your monthly mortgage payment will be closest to:

A) $2,585
B) $660
C) $2,535
D) $1,390

Question 65

Suppose that you are considering an investment that will pay you $4,000 per year for the next five years.The appropriate rate of interest is 5%.You want to know the present value of the cash flows from this investment.To solve this problem in Microsoft Excel,you would use which of the following Excel formulas?

A) =PV(.05,5,4000,0,0)
B) =PV(.05,5,4000,0,1)
C) =PV(5,.05,4000,0)
D) =PV(5,5,4000,0)

Question 66

By quitting smoking,Lisa could save $350 per month in an account with an effective rate of interest at 8.75%.How long will it take her to accumulate $100,000?

A) 13.1 years
B) 15.2 years
C) 12.8 years
D) 14.2 years

Question 67

You are considering investing in a zero coupon bond that will pay you its face value of $1,000 in ten years.If the bond is currently selling for $485.20,then the IRR for investing in this bond is closest to:

A) 12%
B) 8.0%
C) 7.5%
D) 10%

Question 68

You are looking for a new truck and see the following advertisement."Own a new truck! No money down.Just five easy annual payments of $8,000." You know that you can get the same truck from the dealer across town for only $31,120.The interest rate for the deal advertised is closest to:

A) 9%
B) 8%
C) 8.5%
D) 10%

Question 69

Net Present Value can be calculated for any time period provided that

A) both the interest rate and the time period correspond to the period being examined.
B) the interest rate is stipulated as an annual percentage but the time period corresponds to the period being examined.
C) the time period is stipulated as an annual period but the interest rate corresponds to the period being examined.
D) a spreadsheet is used for the calculation since this cannot be computed on a financial calculator.

Question 70

You are interested in purchasing a new automobile that costs $35,000.The dealership offers you a special financing rate of 6% APR (0.5%)per month for 48 months.Assuming that you do not make a down payment on the auto and you take the dealer's financing deal,then your monthly car payments would be closest to:

A) $729
B) $822
C) $842
D) $647

Question 71

With month payment of $580 into a savings account,in 5 years,Allen finally accumulates $80,000 for his dream trip to travel around the world.What could be the effective rate of interest that Allen's savings account enjoys in the 5-year term?

A) 18.37%
B) 20.84%
C) 35.11%
D) 10.75%

Question 72

Define the following terms:
(a)perpetuity
(b)annuity
(c)growing perpetuity
(d)growing annuity

Question 73

Assume that you are 30 years old today,and that you are planning on retiring at age 65.Your current salary is $45,000 and you expect your salary to increase at a rate of 5% per year as long as you work.To save for your retirement,you plan on making annual contributions to a retirement account.Your first contribution will be made on your 31^st birthday and will be 8% of this year's salary.Likewise,you expect to deposit 8% of your salary each year until you reach age 65.At retirement (age 65)you will begin withdrawing equal annual payments to pay for your living expenses during retirement with the first withdrawal on your 65th birthday.If you expect to die one day before your 101st birthday (Your last withdraw will be on your 100th birthday)and if the annual rate of return is 7%,then how much money will you have to spend in each of your golden years of retirement?

Question 74

How do you calculate (mathematically)the present value of the following?
(a)perpetuity
(b)annuity
(c)growing perpetuity
(d)growing annuity

Question 75

Suppose that you deposit $10,000 in an account that pays 6% interest and you want to know how much will be in your account at the end of 10 years.To solve this problem in Microsoft Excel,you would use which of the following Excel formulas?

A) =FV(.06,10000,0,10)
B) =PV(.06,10000,0,10)
C) =FV(.06,10,0,10000)
D) =PV(.06,10,0,10000)

Question 76

Which of the following is NOT a valid time value of money function in Excel?

A) PMT
B) NPER
C) I
D) FV

Question 77

Use the information for the question(s) below.
Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child's university education. Currently university tuition, books, fees, and other costs average $12,500 per year. On average, tuition and other costs have historically increased at a rate of 4% per year.
Assuming that university costs continue to increase an average of 4% per year and that all her university savings are invested in an account paying 7% interest,then the amount of money she will need to have available at age 18 to pay for all four years of her undergraduate education is closest to:

Question 78

You work for a pharmaceutical company that has developed a new drug.The patent on the drug will last for 17 years.You expect that the drug will produce cash flows of $10 million in its first year and that this amount will grow at a rate of 4% per year for the next 17 years.Once the patent expires,other pharmaceutical companies will be able to produce generic equivalents of your drug and competition will drive any future profits to zero.If the interest rate is 12% per year,then the present value of producing this drug is closest to:

A) $71 million
B) $90 million
C) $170 million
D) $105 million

Question 79

The British government has just issued a new consol bond that sells for £1000 and pays interest of 8%.The annual interest payment on this bond must be:

A) £80
B) £8
C) £1,000
D) £12,500

Question 80

You are saving for retirement.To live comfortably,you decide that you will need $2.5 million dollars by the time you are 65.Today is your 30th birthday,and you decide that,starting today,on every birthday up to and including your 65th birthday you will deposit the same amount into your savings account.Assuming the interest rate is 5%,the amount that you must set aside each and every year on your birthday is closest to:

A) $71,430
B) $27,680
C) $26,100
D) $26,260