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:

Ratio Analysis

A quantitative method of gaining insight into a company's liquidity, operational efficiency, and profitability by comparing financial statement items.

Financial Statements

Official records that outline a company's financial activities and conditions, including the balance sheet, income statement, and cash flow statement.

Firm's Financial Position

The status of a company's assets, liabilities, and equity at a given point in time, as reflected in its financial statements.

Market/Book Ratio

Also known as the price-to-book ratio, it compares a company's market value with its book value, indicating how much investors are paying for each dollar of net assets.