Future Value of a Single Amount MCQ AccountingAttempt now to check your rank among 20 students! 50 Questions 30 Mins
About Future Value of a Single Amount
The money you put down today will develop into a greater sum if you don't touch it. A future value, or FV, is a term used to describe the balance in the future. As the years go by, the amount invested in that single deposit might rise significantly for two reasons:
- In addition to the interest earned on the initial deposit,
- Your account will earn interest on the money you deposit.
Compound interest is the process of earning interest on the interest that has already been earned.
Purposes of computing Future Value of a Single Amount (FV)
It is possible to predict how much a deposit, investment, or balance will increase in value in the future if it generates compound interest at a specific rate and is not impacted by any other investments or borrowings. When the cost of an item rises at a consistent pace, it is possible to estimate the future worth of a current purchase by computing the value of that purchase in the future. Another use of the future value formula is to compute the interest rate or the amount of time it takes to obtain a desired future value.
Components of Future Value of a Single Amount (FV)
Present value amount (PV): This may be a single deposit, a current account balance, the current cost of an item, or anything else that is relevant at the time.
Future value amount (FV): This is how much the current value is expected to increase in the near future. It may be the balance of an account in the future, the cost of an item in the future, etc.
Number of time periods (n): Compounding interest is the process of continuously increasing a principal amount over time.
Interest rate for the time period (i): Interest rates are recalculated to be 15% per month when they are compounded annually instead of monthly when they are compounded quarterly.
Following are some of the multiple choice questions on the Future Value of a Single Amount with answers that will help the students in developing their knowledge.