All else equal, the future value of a lump-sum amount invested today will increase if the
A)interest rate that is earned is lowered.
B)number of compounding periods is increased.
C)investment time period is shortened.
D)amount initially invested is lowered.
E)Two or more of the above answers are correct.

Question

Quizplus · Accepted Answer

The future value of a lump-sum amount invested today will increase if the number of compounding periods is increased. This is because more frequent compounding allows for the accumulation of interest on interest, resulting in a higher final amount. Lowering the interest rate, shortening the investment time period, or lowering the initial investment amount will all decrease the future value of the investment.

All Else Equal, the Future Value of a Lump-Sum Amount