Question

True or false:

If you know the present value and the time that interest is accrued, you have enough information to find the future value.

Answer 1

Future value refers to a method of calculating how much the present value of an asset or cash will be worth at a specific time in the future. There are two ways of calculating future value :Simple annual interest and annual compound interest . Future value with simple interest is calculated in the following manner : Future value = Present value x [1 + ( interest rate x no. of years) ] Future value with compounded interest is calculated in the following manner : Future value = present value x [( 1+interest rate )™ ] TM = no. of years.  

Simple interest is always based on the present value , whereas compounded interest means that the present value grows exponentially each year.

So, the present value and the time that interest is accrued is not the enough information to find the future value.