The correct formula that relates present value (PV) to future value (FV), if interest rate is i percent per year over n years is
A) $\mathrm { PV } = \mathrm { FV } ( 1 + i ) ^ { n }$
B) $\mathrm { FV } = \mathrm { PV } ( i) ^ { n }$
C) $\mathrm { PV } = \mathrm { FV } _ { \mathrm { n } } / ( 1 + i ) ^ { n }$
D) $\mathrm { FV } = \mathrm { PV } ( 1 + i ) ( n )$

Question

Quizplus · Accepted Answer

The correct formula that relates present value (PV) to future value (FV), if interest rate is i percent per year over n years is PV = FV / (1+i)^n. This formula takes into account the time value of money and allows for the calculation of the present value of a future sum of money, considering the effects of interest. Choice A is the formula for calculating future value with compound interest. Choice B is the formula for calculating future value with simple interest. Choice D is an incorrect formula that does not take into account the exponent on (1+i) needed to properly compound interest over a number of years.

The Correct Formula That Relates Present Value (PV) to Future PV=FV(1+i)n\mathrm { PV } = \mathrm { FV } ( 1 + i ) ^ { n }PV=FV(1+i)n

The Correct Formula That Relates Present Value (PV) to Future $\mathrm { PV } = \mathrm { FV } ( 1 + i ) ^ { n }$