# the process for converting present values into future values is called . this process requires knowledge of the values of three of four time-value-of-money variables. which of the following is not one of these variables?

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## Solved The process for converting present values into future

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## The process for converting present values into future values is called compounding . This process requires...

FREE Answer to The process for converting present values into future values is called compounding . This process requires...

# The process for converting present values into future values is called compounding . This process requires...

The duration of the investment (N)

The present value (PV) of the amount invested

The inflation rate indicating the change in average prices

The interest rate (I) that could be earned by invested funds

Identify whether the following statements about the simple and compound interest methods are true or false.

Statement

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.

Everything else held constant, an account that earns compound interest will grow more quickly than an otherwise identical account that earns simple interest.

All other factors being equal, both the simple interest and the compound interest methods will accrue the same amount of earned interest by the end of the first year.

Nicholai is willing to invest $35,000 for six years, and is an economically rational investor. He has identified three investment alternatives (X, Y, and Z ) that vary in their method of calculating interest and in the annual interest rate offered. Since he can only make one investment during the six-year investment period, complete the following table and indicate whether Nicholai should invest in each of the investments.

Note: When calculating each investment's future value, assume that all interest is earned annually. The final value should be rounded to the nearest whole dollar.

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Sam is willing to invest $30,000.00 for four years, and is an economically rational investor. He has identified three investment alternatives (A, B, and C) that vary in their method of calculating interest and in the annual interest rate offered. Since he can only make one investment during the four-year investment period, complete the following table and indicate whether Sam should invest in each of the investments. Note: When calculating each investment’s future value, assume that all interest is compounded...

## The process for converting present values into future values is called _____. This process requires knowledge of the values of three of four time

Answer to: The process for converting present values into future values is called _____. This process requires knowledge of the values of three of...

## Question:

The process for converting present values into future values is called _____. This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables?

a. The interest rate that could be earned by deposited funds

b. The present value of the amount deposited

c. The duration of the deposit

d. The trend between the present and future values of an investment

## Time Value of Money:

The time value of money is a concept taught in finance and investments. It refers to the changing value of money over time due to the interest rate you can make on that money. In other words, it says that $1 today is worth more than $1 tomorrow because you can invest it today at a rate of interest. The time value of money concept only works if interest rates are greater than 0.

## Answer and Explanation: 1

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The process for converting present values into future values is called: **future value of money**.

The correct answer is: **d. The trend between the...**

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