Dropdowns:

1. be / not be
2. Account A / Account X / Either Account
3. $2,000.00 / $6,000.00
4. $2,464.20 / $2,000.00
5. $75.26 / 0.00

Future Value of Account A Note: Account A pays simple interest. = Principal +[( Principal Interest Rate ) Investment Period ] =$2,000+[($2,00011%)3 years ] =$ Future Value of Account X Note: Account X pays compound interest. Future Value X= Present Value x Interest Rate Factor = Present Value (1+InterestRate)N =$2,000(1+0.11)3 =$ To find the interest rate factor, you can use four different ways, including multiplying it out: Interest Factor (1+0.11)(1+0.11)(1+0.11)=1.3676 Or you can use exponents, and calculate it directly: Interest Factor =(1+0.11)3=1.3676 The third alternative for solving the equations is to use a spreadsheet, and the fourth is to let a financial calculator perform the calculation. This requires that you know how your calculator functions and how to enter the following variables: P/Y indicates the number of compounding periods per year, N is the number of years, I is the interest rate, PV is present value, and FV is future value. Difference in Future Values Difference =FVXFVA JORDAN: So, what do you think? MEGAN: Your work looks fantastic! But now I've got to challenge you with one last question: What would happen to the two future value numbers and the difference between them if the two accounts did not pay interest? JORDAN: Uh . . . if the interest rate were zero, then interest would would be earned by ; the future value of account X would be ; the future value of account A ; and the difference between the two accounts would be MEGAN: Correct! You are so ready for Dr. Johnson's next quiz