Asked by Jasmine Hawkins on Jun 10, 2024
Verified
Which of the following would increase the future value of an amount?
A) An increase in the interest rate
B) An increase in the amount
C) An increase in the time until future value is to be received
D) a and b
E) All of the above
Future Value
The value of an investment at a specified date in the future that is equivalent in value to a specified sum today after being compounded over time.
Interest Rate
The portion of a total amount of money levied for borrowing it, usually represented as a yearly rate.
Amount
The total sum or quantity of something.
- Discuss the role of interest rates in shaping present and future economic values.
- Calculate present and future values of specific amounts under given interest rates and time periods.
Verified Answer
ZL
Zemirah LandsJun 11, 2024
Final Answer :
E
Explanation :
All of the factors listed - an increase in the interest rate, an increase in the amount, and an increase in the time until the future value is to be received - would increase the future value of an amount. Higher interest rates lead to more interest earned, a larger initial amount results in a larger base to apply the interest rate to, and a longer time period allows for more interest compounding periods.
Learning Objectives
- Discuss the role of interest rates in shaping present and future economic values.
- Calculate present and future values of specific amounts under given interest rates and time periods.