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Bob Lower wants to retire in 10 years. At that time he wants to have a lump sum accumulated that would allow him to withdraw $35,000 a year for the next 20 years. Assume that Bob earns an after-tax return of eight percent. Ignore the inflation in these calculations.
- Suppose an investor invests $2,000 in a Certificate of Deposit which earns eight percent compounded quarterly. What is the value of the CD in five years?

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Quizplus · Accepted Answer

Using the formula A = P(1 + r/n)^(nt), where A is the ending amount, P is the principal, r is the annual interest rate, n is the number of times compounded per year, and t is the number of years, we can solve for the value of the CD:
A = 2000(1 + 0.08/4)^(4*5) = $2,972.48 (rounded to the nearest cent)
Therefore, the answer is D, $2,972.

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