Money is invested into an account earning 4.25% interest compounded annually. if the accumulated value after 18 years will be $25,000, approximately how much money is presently in the account? a. $5,875 b. $11,820 c. $19,125 d. $23,960

Option (b) is correct.

The present amount in the account is $11,820

Step-by-step explanation:

Given :  Money is invested into an account earning 4.25% interest compounded annually. If the accumulated value after 18 years will be $25,000

We have to find the amount of money  is presently in the account.

Since, the interest is  compounded annually.

Using formula for the present value.

Where PV = present value.

FV is future value.

n is time period

and r is interest rate.

Given : FV = 25000

r = 4.25%

t = 18 years.

Substitute, we get,

Simplify, we get,

Thus, rounding to nearest tens, we have,

The present amount in the account is $11,820

required rate of return = 0.166 = 16.6%

step-by-step explanation:

under the capital asset pricing model (capm), the required or expected rate of return for a particular security or asset is given using the formula:

required rate of return = risk-free rate + beta*(market risk premium)

we are given that;

risk-free rate = 4% = 0.04

beta = 1.4

market risk premium = 9% = 0.09

we simply plug these values into the above formula;

required rate of return = 0.04 + 1.4*(0.09)

required rate of return = 0.04 + 0.126

required rate of return = 0.166 = 16.6%