LEXI: So$,$ why is it important to be able to calculate the future value of some amount invested?

LUKE: First, remember that the amount invested is usually calles

period is called

It is important to be able to calculate a future value so that you can know in advance what a given amount of

principal will be worth after earning a specified

for a known

LEXI: OK$,$ I understand that and I know the amount invested today can be called the

value of the investment, whereas the amount

realized after the passage of $"$t$"$ period of time is called its

value. But what causes the present and future values to be different

values?

LUKE: Two things cause the present and future values to be different amounts. First, the

earned during the investment period

causes the future value to be greater than, equal to$,$ or less than the present value. Second, the method used to calculate the interest earned

that is$,$ whether the account pays.

interest$-$determines the amount by which the future value differs from the

present value.