All other things being equal, the numerical difference between a present and a future value corresponds to the amount of interest earned during the deposit or investment period. Each line on the following graph corresponds to an interest rate: 0%, 8%, or 16%. Identify the Interest rate that corresponds with each line. VALUE Dollars C 0 1 2 3 7 8 9 10 TIME (Yearsi Line A: Line B: Line : Investments and loans base their interest calculations on one of two possible methods: the Interest and the Interest methods. Both methods apply three variables--the amount of principal, the interest rate, and the investment or deposit period.-to the amount deposited or invested in order to compute the amount of interest. However, the two methods differ in their relationship between the variables Assume that the variables 1, 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 (PV) using: Compound interes? ASSN 11 - Time Value of Money 110 TIME Year and Study Tools Offers Options Une A: 16 Line B.99 Line C Success Tips Success Tips Investments and loans base their interest calculations on one of two posible methods: the Interest and the Interest methods. Both methods apply three variables the amount of principal, the interest rate, and the investment or deposit period to the amount deposited or invested in order to compute the amount of interest. However, the two methods offer in their relationshi between the variables ED FOR YOU dy Tools Assume that the variables 1 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 s for introductory Finance OP-Px( 11) OP-1+1)/PV Fy-PV/(1-1) Feedback Simple interest ON-WOP XIX OFV-PV-CP XIX OP-PV/V XIXN) Identify whether the following statements whout the simple and compound interest methods are true or to True Statement After the end of the second year and other factors remaining qulluture value Bated on compound interest will never exceed the future valued on import All other variables constant investments in internet have to pay higher restorante Type here to search Simple interest O FV = PV + PV XIXN) O PVPV - (PVTXN) O FV - PV / (PV XIXN) Identify whether the following statements about the simple and compound interest methods are true or false True False o Statement 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 valoe based on simple interest All other variables held constant, Investments paying simple interest have to pay significantly higher interest rates to earn the same amount of Interest as an account earning compound interest All 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 0 Alek is willing to invest $30,000 for eight years, and is an economically rational investors. 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 eight year investment period, complete the following table and indicate whether Alok should invest in each of the investments Note: When calculating each investment's future value, assume that all interest is earned annually. The final value should be rounded to the nearest whole dollar Expected Future Value Make this investment? Investment A Interest Rate and Method 9% simple interest 4% compound interest 6 compound interest S 5 B *** C Grade It Now Save & Continue Come without saving