Using the Future Value Table, a Student Found That the Future

question 78

Multiple Choice

Using the future value table, a student found that the future value amount of $1 for 5 years at an annual interest rate of 10% is 1.611.The student also observed that the future value of $1 for 5 years at 10% compounded semiannually is 1.629.This means that

• A) the more often the compounding, the higher the future value.
• B) the student was looking in the wrong column; the second amount should be 1.611/2.
• C) there was an error in the table.
• D) when interest is compounded semiannually, more money must be deposited to have a desired ending balance.

---

Definitions:

Economic Growth

An increase in the production of goods and services in an economy over a period of time, often measured by GDP.

Simon Kuznets

Simon Kuznets was a Nobel Prize-winning economist known for his work on economic growth and for developing the concept of Gross National Product (GNP).

Quality of Inputs

The standard or grade of raw materials and labor used in the production process, influencing the efficiency and outputs.

Standard of Living

A measure of the wealth, comfort, material goods, and necessities available to a certain socioeconomic class or geographic area.