Which of the following is the correct way to figure the future value of $X that earns r percent for N years?
A)$X(1 + rN)ᴺ
B)$X(1 + r)ᴺ
C)$X(1 + rN)
D)$X(1 + r/N)N

Question

Quizplus · Accepted Answer

The formula for the future value of a present amount X that earns a fixed interest rate r for N periods is given as X(1+r)^N. Therefore, the correct way to figure the future value of X that earns r percent for N years is X(1 + r)^N. Option B correctly represents this formula. Option A is incorrect because it uses the exponent N twice, whereas only one of them is required. Option C is incorrect because it multiplies X by the product of interest rate and the number of years, which does not account for compounding. Option D is incorrect because it uses a wrong formula where the compounding period is assumed to be annually.

Which of the Following Is the Correct Way to Figure