As the interest rate increases for any given period, the future value will
Question
As the interest rate increases for any given period, the future value will
Solution
Increase.
Here's why:
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The future value of an investment is calculated using the formula: FV = PV * (1 + r/n)^(nt), where:
- FV is the future value of the investment
- PV is the present value of the investment
- r is the annual interest rate (in decimal form)
- n is the number of times that interest is compounded per year
- t is the number of years the money is invested for
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From this formula, we can see that the future value of an investment is directly proportional to the interest rate. This means that as the interest rate (r) increases, the future value (FV) of the investment also increases.
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This is because the interest earned on the investment is reinvested at the same interest rate. So, the higher the interest rate, the more interest you earn, and the more your investment grows.
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Therefore, as the interest rate increases for any given period, the future value will increase.
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