All other things being equal, the numerical difference between a present and a future value corresponds to the amount of interest earned during the deposit or investment period. Each line on the following graph corresponds to an interest rate: 0%, 10%, or 20%. Identify the interest rate that corresponds with each line.

Line A: a. 20% b. 10% c. 0%

Line B: a. 10% b. 0% c. 20%

Line C: a. 0% b. 20% c. 10%

Investments and loans base their interest calculations on one of two possible methods: the select (complex or simple) interest and the select (uncomplicated or compounded) interest methods. Both methods apply three variablesthe amount of principal, the interest rate, and the investment or deposit periodto the amount deposited or invested in order to compute the amount of interest. However, the two methods differ in their relationship between the variables.

Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited or invested, respectively. Which equation best represents the calculation of a future value (FV) using:

Compound interest?

a. FV = PV / (1 + I)NN

b. FV = PV x (1 + I)NN

c. FV = (1 + I)NN / PV

Simple interest?

a. FV = PV + (PV x I x N)

b. FV = PV / (PV x I x N)

c. FV = PV - (PV x I x N)