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Discounting and compounding are related because both processes involve the time value of money, reflecting how the value of money changes over time. Compounding calculates the future value of an investment by applying interest over time, while discounting determines the present value of future cash flows by removing the effects of interest. Essentially, discounting is the reverse of compounding; where compounding grows an amount, discounting reduces it to its present value, both using the same interest rate concept. Together, they provide a comprehensive understanding of how money behaves over time in financial contexts.
True
What is the future value of $1,200 a year for 40 years at 8 percent interest? Assume annual compounding.
With only one year the value is 11600
Future value (FV) is a financial concept that represents the amount of money an investment will grow to over a specified period at a given interest rate. It accounts for the effects of compounding, where interest earned is reinvested to generate additional earnings. FV is commonly used in finance to assess the potential growth of savings, investments, or cash flows over time. The formula for calculating future value is FV = PV × (1 + r)^n, where PV is the present value, r is the interest rate, and n is the number of periods.
No, the future value of an investment does not increase as the number of years of compounding at a positive rate of interest declines. The future value is directly proportional to the number of compounding periods, so as the number of years of compounding decreases, the future value of the investment will also decrease.
The greater the number of compounding periods, the larger the future value. The investor should choose daily compounding over monthly or quarterly.
The future value of monthly deposits is the total amount of money accumulated over time by consistently adding money to an investment or savings account on a monthly basis.
No, the face value of an investment is not the same as its future value. The face value is the initial value of the investment, while the future value is the value it will have at a later date after earning interest or experiencing changes in market value.
The future value of monthly deposits formula calculates the total value of an investment that receives regular monthly contributions over time. It takes into account the monthly deposit amount, the interest rate, and the number of months the investment is held for. By using this formula, investors can predict how much their investment will grow over time by consistently adding money to it each month.
The compound interest formula with monthly deposits is A P(1 r/n)(nt) PMT((1 r/n)(nt) - 1)/(r/n), where A is the future value of the investment, P is the initial principal, r is the annual interest rate, n is the number of compounding periods per year, t is the number of years, and PMT is the monthly deposit amount. This formula can be used to calculate how an investment grows over time by inputting the relevant values and solving for the future value.
an investment in the future
College loans help increase future earning power but result in a long-term commitment to monthly payments.
College loans help increase future earning power, but result in a long term commitment to monthly payments.
Future Value = (Present Value)*(1 + i)^n {i is interest rate per compounding period, and n is the number of compounding periods} Memorize this.So if you want to double, then (Future Value)/(Present Value) = 2, and n = 16.2 = (1 + i)^16 --> 2^(1/16) = 1 + i --> i = 2^(1/16) - 1 = 0.044274 = 4.4274 %
Future progressive is -- will + be + present participlewill be earning. eg By this time next year I will be earning twice as much as you.
Yes