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Future Value of Account A Note: Account A pays simple interest. Future ValueA = Principal + Interest Principal + [(Principal x Interest Rate) x Investment
Future Value of Account A Note: Account A pays simple interest. Future ValueA = Principal + Interest Principal + [(Principal x Interest Rate) x Investment Period] $2,000 + [($2,000 x 996) x 3 years] = Round your answer to two decimal places. Future Value of Account X Note: Account X pays compound interest. Future Valuex = Present Value x Interest Rate Factor Present Valuex(1 +Interest Rate)n years $2,000 x (1 + 0.09)3 = - Round your answer to two decimal places. To find the interest rate factor, you can use three different ways, including multiplying it out: Interest Factor(1 0.09) x (1 0.09) x (1 0.09)1.2950 Or using exponents and calculating it directly: Interest Factor(10.09)31.2950 Or looking up the value in the Future Value Interest Factor Table: Interest Factors Periods 6% 7% 8% 9% 1090 1190 1.0600 1.0700 1.0800 1.0900 1.1000 1.1100 2 1.1236 1.1449 1.1664 1.1881 1.2100 1.2321 1.1910 1.2250 1.2597 1.2950 1.3310 1.3676 4 1.2625 1.3108 1.3605 1.4116 1.4641 1.5181 The fourth alternative for solving the equations 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: I/YR 9% P/Y PV FV 2,000 Answer 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 = FVx_FVA Round your answer to two decimal places
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