PGMP · Question #310
You are the program manager for your organization. You have proposed a program that will cost $750,000 and will last for four years. Management is concerned with the cost of the program in relation…
The correct answer is B. $946,857. This question requires calculating the Future Value (FV) of the investment using the compound interest formula: FV = PV × (1 + r)^n, where PV = $750,000, r = 0.06 (6%), and n = 4 years. Calculation: (1.06)^4 = 1.06 × 1.06 × 1.06 × 1.06 ≈ 1.26248. Then: $750,000 × 1.26248 ≈…
Question
You are the program manager for your organization. You have proposed a program that will cost $750,000 and will last for four years. Management is concerned with the cost of the program in relation to the return your program will bring. If the rate of return is six percent what is the minimum value your project should return in four years based on the investment of the program?
Options
- A$750,001
- B$946,857
- C$795,000
- D$750,000
How the community answered
(65 responses)- A11% (7)
- B78% (51)
- C6% (4)
- D5% (3)
Explanation
This question requires calculating the Future Value (FV) of the investment using the compound interest formula: FV = PV × (1 + r)^n, where PV = $750,000, r = 0.06 (6%), and n = 4 years. Calculation: (1.06)^4 = 1.06 × 1.06 × 1.06 × 1.06 ≈ 1.26248. Then: $750,000 × 1.26248 ≈ $946,857. This represents the minimum return the program must generate over four years to justify the $750,000 investment at a 6% rate of return. Option A ($750,001) is barely above the principal and ignores compounding. Option C ($795,000) represents only a single year of simple interest ($750,000 × 1.06). Option D ($750,000) is simply the break-even point with no return at all. Compound interest over 4 years yields $946,857.
Topics
Community Discussion
No community discussion yet for this question.