# However the two methods differ in their relationship

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However, the two methods differ in their relationship
between the variables. Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited or invested, respectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? FV = PV + (PV x I x N) FV = PV / (1 + I)NN FV = PV x (1 + I)NN Simple interest? FV = PV x (PV x I x N) FV = PV + (PV x I x N) FV = PV x I x N Identify whether the following statements about the simple and compound interest methods are true or false. Statement True False Laura is willing to invest \$30,000 for eight years, and is an economically rational investor. She has identified three investment alternatives (L, M, and P) that vary in their method of calculating interest and in the annual interest rate offered. Since she can only make one investment during the eight-year investment period, complete the following table and indicate whether Laura should invest in each of the investments. Note: When calculating each investment s future value, assume that all interest is earned annually. Do not round your
intermediate calculations. The final value should be rounded to the nearest whole dollar. Investment Interest Rate and Method Expected Future Value Make this investment? 3. Future value The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value.

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