how to enter the following varable 3 11% 2000 Input Keystroke P/YNI output PV FV

Question

how to enter the following varable 3 11% 2000 Input Keystroke P/YNI output PV FV 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 DifferenceFV-FVA = $ 5.26 Akiko So, what do you think? Shiloh 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? Uh . . . if the interest rate were zero, then interest would account X would be Akiko eamed by : the future value of account A would be : the future value of ; and the difference between the two accounts would be shiloh Correct You are so ready for Dr, Smith's next quiz, MO

Explanation / Answer

Amount invested is usually called the PRINCIPAL Amount earned during the investment period is called INTEREST Earning a speicified   AMOUNT for a known PERIOD. Amount of principal invested today can be called the PRESENT value of the investment Amount realised after a passage of t period of time is called its FUTURE value. First, the INTEREST earned during the investment period whether the account pays SIMPLE/COMPOUND interest- determines the amount SIMPLE interest-interest is earned solely on invested principal COMPOUND interest --interest is earned not only on principal,but also on previously earned interest. Account earning COMPOUND interest should have greater future value,assuming identical amounts of principal,interest rates & investment periods.

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