Which one of the following statements is correct?
A) The future value decreases as the period of time increases, all else constant.
B) The future value of $100 invested at 6% simple interest increases at a constant rate as the period of time increases.
C) There is an inverse relationship between the future value of a lump sum investment and the length of the investment period.
D) The future value of $100 invested at 6%, compounded annually, increases over time in an exponential manner.
E) Because time is the exponent in the future value formula, the length of an investment period has minimal effect on the future value of the investment.

Question

Quizplus · Accepted Answer

The future value of an investment compounded annually grows exponentially because the interest earned in each period is added to the principal, which increases the base amount on which interest is calculated in subsequent periods.

Which One of the Following Statements Is Correct