If You Put $100 into a Bank Account That Earns

question 223

Multiple Choice

If you put $100 into a bank account that earns five percent interest per year,what is the formula you should use to determine the account's future value in one year?

• A)Future value equals the present value divided by the rate of interest.
• B)Future value equals the present value multiplied by the rate of interest.
• C)Future value equals the present value multiplied by one plus the rate of interest in decimals.
• D)All of these yield the same answer.

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Definitions:

Contractual Loan Restrictions

Stipulations within a loan agreement that limit certain actions of the borrower to protect the interests of the lender.

Preferred Dividends

Preferred dividends are payments made to preferred shareholders before any dividends are paid to common shareholders, typically at a fixed rate.

Operating Expenses

Costs associated with the day-to-day functions of a business, excluding the cost of goods sold.

Cost of Goods Sold

An expense reported on the income statement that represents the total cost of products or services that have been sold.