DOLLARS (PV) 20000 15000 10000 5000 0 + 0 1 2 3 A 5 6 TIME (periods) 7 8 O FV PVxIxa PV O FV ID O FV=PV + (PVxrxn) O FV PV (PV xrxa) C 9 10 Line A corresponds to Y while Line B is consistent with Line C corresponds to 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 r, 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 simple interest? Which equation best represents the calculation of a future value (FV) using compound interest? O FV PV+ (PV xrxa)

Investments and loans base their interest calculations on one of bwo possible methods: the incerest and the interest methods. Both methods apply three vanables-the amount of principal, the interest race, and the investment or deposit period - to the amount deposited or inverted in order to compute the amount of incerest. Howeves, the two meshods differ in their relationship bethesen the variables. Aasume that the variables g,n, and PV represent the intereat ratm, invesoment or deposit period, and presern value of the amoure deposted or invested, reapectively. Which equation best represents the caiculation of a future value (PV) using simple incerest? FV =PV1= PV=m+mpV PV=PV+(PVrn) PVPV(PVrm) Which equasion best represents the caloulabion of a finurn value (PY) using compound interest? PV=PV+(PVrn) Which equation best represents the calculation of a future value (FV) using simple interest? FV=PVInFV=ImaPVPV=PV+(PVrn)FV=PV(PVrn) Which equation best represents the calculation of a future value (FV) using compound interest? FV=PV+(PVrn)FV=(1+)2ppvFV=PV(t+r)PV=PV(1+r)n Idanbify whecher the following statements about the simple and compound interest mechods are true or false Hubert is willing to invest $5,000 for two years, and is an economically rational investoc He has identifed three imvestment altrematives ( x, X, and Z) that vary in their method of caloulating interest and in the annual interect rate offered. Since be can only make one investment during the wo-year imvestment penod, complete the following table and indicate wheefor Hubert should invest in each of the imvestments. Note: When calculating each investment's future value, assume that all interest is compounded annually, The final value should be rounded to the nearest whole dollar