# Fv pv pv x i x n fv pv 1 inn fv pv x 1 inn simple

• No School
• AA 1
• 7

This preview shows page 5 - 7 out of 7 pages.

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 FalseAll other factors being equal, both the simple interest and the compound interest methods will accrue the same amount of earned interest by the end of the first year.After the end of the second year and all other factors remaining equal, a future value based on compound interest will never exceed the future value based on simple interest.The process of earning compound interest allows a depositor or investor to earn interest on any interest earned in prior periods. 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?L5% compound interest M4% �� simple interest P7% compound interest �� ��

#### You've reached the end of your free preview.

Want to read all 7 pages?

• Fall '19

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern