Question

When interest is compounded quarterly, future value or cash flow (CF), present value (PV), the interest rate (i), and the frequency of compounding (n ) related according to _________:

a. CF PV {1+(1/4)}
b. CF PV {1+(i/4) }4n.
c. PV CF {1+(i/4) }4n.
d. PV CF {1+(i/4) }4n.

Answer 1

When interest is compounded quarterly, the future value or cash flow (CF), present value (PV), the interest rate (i), and the frequency of compounding (n) are related according to the formula: CF = PV × (1 + i/4)4n. Therefore, the correct option is d. PV CF {1+(i/4) }4n.

Step-by-step explanation:

When interest is compounded quarterly, the future value or cash flow (CF), present value (PV), the interest rate (i), and the frequency of compounding (n) are related according to the formula:

CF = PV × (1 + i/4)4n

Therefore, the correct option is d. PV CF {1+(i/4) }4n.