Edward wishes to save enough money to purchase a retirement lake cabin. He is willing to spend $500, 000 for the cabin and he can save $25, 000 per year and invest the money into an account earning 8.00% per year. If Edwards investments come in the form of equal annual end-of-the-year cash flows and the first cash flow is in exactly one year, how long will it take him to save enough money to buy the lake cabin?

FINANCIAL MANAGEMENT

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

Edward wishes to save enough money to purchase a retirement lake cabin. He is willing to spend $500, 000 for the cabin and he can save $25, 000 per year and invest the money into an account earning 8.00% per year. If Edward’s investments come in the form of equal annual end-of-the-year cash flows and the first cash flow is in exactly one year, how long will it take him to save enough money to buy the lake cabin?

A	Between 8 and 9 years
B	Between 10 and 11 years
C	Between 12 and 13 years
D	Exactly 20 years

Explanation:

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FINANCIAL MANAGEMENT