Future ValueA = Principal + Interest = Principal + [(Principal x Interest Rate) x Investment Period] = $2,000 + [($2,000 x 7%) x 3 years] = $ 2,420.00 Future Value of Account X Note: Account X pays compound interest. Future ValueX = Present Value x Interest Rate Factor = Present Value (1 + Interest Rate)N = $2,000 x (1 + 0.07) = $ To find the interest rate factor, you can use four different ways, including multiplying it out: Interest Factor (1 + 0.07) x (1 + 0.07) x (1 + 0.07) = 1.2250 Or you can use exponents, and calculate it directly: Interest Factor = (1 + 0.07) = 1.2250 The third alternative for solving the equations is to use a spreadsheet, and the fourth is to let a financial calculator perform the calculation. This requires that you know how your calculator functions and how to enter the following variables: Input 1 3 7 2000 Keystroke P/Y N I PV FV Output Answer P/Y indicates the number of compounding periods per year, N is the number of years, I is the interest rate, PV is present value