Which formula is used to calculate future value (FV)?

The formula for calculating future value (FV) is crucial in finance as it helps to determine how much an investment made today will grow over time, considering the interest rate and time period. The correct formula, which is represented by the selected answer, is FV = I * (1 + (R * T)).

In this formula:

• I represents the initial investment or principal amount.

• R is the annual interest rate (expressed as a decimal).

• T denotes the number of time periods (often in years) the money is invested or borrowed.

This formula reflects the idea of simple interest, where the investment grows at a steady rate over a specific time frame. The term (1 + (R * T)) calculates the overall growth factor of the investment, including both the principal and the interest earned over that period.

Using this formula allows investors to project how their initial amount will increase based on the specified interest rate and the duration of the investment, which is foundational in financial decision-making.