1- discounting, compounding

line a, b , c : 0 , 11 , 21

2- complex, simple

3- uncomplicated, compound

last one is yes or no

3. Future value The prindpal 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. This process requires knowledge of the values of three of The process for converting present values into future values is called four time-value-of-money variables. Which of the following is not one of these variables? The duration of the lovestment (N) The present value (PM) of the amount invested The inflation rate indicating the change in werage prices The interest rate (I) that could be earned by invested funds All other things being equal, the numerical difference between a present and a future value corresponds to the amount of interest earned during the depoult or investment period. Each line on the following graph corresponds to an interest rate: 0%, 11%, or 21%. Identify the interest rate that corresponds with each line VALUE Dollar 0 1 2 3 4 5 . TO TIME Years Line A: Une B Une C Investments and cons base their interest calculations on one of two posible methods: the terest and the nerent methods. Both methods apply three variables-them out of principal, the interest rate, and the investment or deposit period to the mount deposited or bovested in order to compute the amount of interest. However, the bie methods sites in their relationship between the variables Assume that the variables 1, N, and represent the interest rate Investment or deposit period, and presented the amount deposited or Invested, respectively. Which equation best represents the calculation de luture value (PV) using Compound interest TV - (1 +TN/PY FPV + PV XIX TPX(+1) Simple interest PV-PV (PVxIxN) PVV XXN TVW-PVXIX) Identify whether the following statements about the simple and compound interest methods are true or false True False Statement All other factors being equal both the simple interest and the compound interest methods were 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 eamed in peer periods. Nicholal is willing to invest $35,000 for six years, and is an economically rationat investor. He has identified three investment alternatives (A, B, and C) that vary in their method of calculating interest and in the annual interest rate offered. Since he can only make one investment during the sixyear investment period, complete the following table and indicate whether Nichoial should invest in each of the investments Note: When calculating each investment's Future value, assume that all interesz is earned annually. The final value should be rounded to the nearest whole dollar Expected Future Value Make this investment? Investment Interest Rate and Method 95 simple interest 45 compound interest 65 compound interest