Identify the interest rate that corresponds with each line. 20000 15000- B 10000 5000 0 1 6 8 S 10 TIME (periods) Line A corresponds to, 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. 3 7 Line A corresponds to while Line B is consistent with Line C corresponds to interest and the Investments and loans base their interest calculations on one of two possible methods: 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? FV = PV (PV x rx n) FV = PV X (PV x rx n) FV = PV + (PV x rx n) FV = PV XIX n Which equation best represents the calculation of a future value (FV) using compound interest? FV = PV x (1 + r) FV = PV + (PV x rx n) PV FV = (1+r) (1+r) FV = PV Identify whether the following statements about the simple and compound interest methods are true or false. 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. 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 earned in prior periods. Becky is willing to invest $10,000 for eight years, and is an economically rational investor. She has identified three investment alternatives (L, M, and P) that vary in their method of calculating interest and in the annual interest rate offered. Since she can only make one investment during the eight-year investment period, complete the following table and indicate whether Becky should invest in each of the investments. 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. Investment Interest rate and Method Expected future value Make this investment? L 9% compound interest M 8% simple interest P 15% compound interest Save & Continue kkk Grade It Now True False O Identify the interest rate that corresponds with each line. 20000 15000- B 10000 5000 0 1 6 8 S 10 TIME (periods) Line A corresponds to, 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. 3 7 Line A corresponds to while Line B is consistent with Line C corresponds to interest and the Investments and loans base their interest calculations on one of two possible methods: 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? FV = PV (PV x rx n) FV = PV X (PV x rx n) FV = PV + (PV x rx n) FV = PV XIX n Which equation best represents the calculation of a future value (FV) using compound interest? FV = PV x (1 + r) FV = PV + (PV x rx n) PV FV = (1+r) (1+r) FV = PV Identify whether the following statements about the simple and compound interest methods are true or false. 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. 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 earned in prior periods. Becky is willing to invest $10,000 for eight years, and is an economically rational investor. She has identified three investment alternatives (L, M, and P) that vary in their method of calculating interest and in the annual interest rate offered. Since she can only make one investment during the eight-year investment period, complete the following table and indicate whether Becky should invest in each of the investments. 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. Investment Interest rate and Method Expected future value Make this investment? L 9% compound interest M 8% simple interest P 15% compound interest Save & Continue kkk Grade It Now True False O
