Which of the following statements is correct for an investor starting with $1,000 in common stocks over a 20-year investment horizon in which stocks averaged 11 percent in nominal terms and 4 percent in real terms? The portfolio value is now approximately:

Question

Quizplus · Accepted Answer

To find the future value of the investment, we can use the formula: FV = PV*(1+r)^n, where PV is the present value, r is the annual rate of return, and n is the number of years.

In this case, the present value is $1,000, the annual rate of return is 11% in nominal terms (or 7% in real terms, since inflation is 4%), and the investment horizon is 20 years.

Using this formula, we can calculate the future value in nominal terms as: FV = $1,000*(1+0.11)^20 = $8,062.

Therefore, the correct answer is D, which represents the future value of the investment in nominal terms.

Which of the Following Statements Is Correct for an Investor