Sara is investing $1,000 today.Which one of the following will increase the future value of that amount?
A)Shortening the investment time period.
B)Paying interest only on the principal amount.
C)Paying simple interest rather than compound interest.
D)Paying interest only at the end of the investment period rather than throughout the investment period.
E)Increasing the interest rate.

Question

Quizplus · Accepted Answer

Increasing the interest rate will increase the future value of the investment. This is because a higher interest rate will result in more interest earned on the principal amount over time. None of the other choices will increase the future value, and some may actually decrease it (such as paying simple interest rather than compound interest).

Sara Is Investing $1,000 Today