The formula to calculate the value of $1 put into savings today is fv = pv*((1+i

Question

The formula to calculate the value of $1 put into savings today is fv = pv*((1+i)^n). The variables are fv = future value, pv = present value, i = interest rate per period, and n = the number of periods. In the formula, n is an exponent. What does the exponent in this case state that you need to do mathematically to the (1 + i) segment of the formula? Select an interest rate and number of periods—be sure your numbers are different from other students who already answered this question—to calculate the future value of $1. How much money would you have at the end of the period you determined if you invested $1 today (pv)?

Explanation / Answer

The n in the equation is the power that you need to take (1+i) to for example: if you chose n to equal 3, and the interest rate to equal 25% (1+i)^3 = (1+.25)^3 = (1.25)^3 = 1.25 * 1.25 * 1.25 = 1.95

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