Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

Which of the following is the formula for the future value of an ordinary annuity, where $PMT$ is the periodic payment, $r$ is the interest rate per period, and $n$ is the number of periods?

$FV = PMT \times \dfrac{(1 + r)^n - 1}{r}$

$FV = PMT \times \dfrac{1 - (1 + r)^{-n}}{r}$

$FV = PV \times \dfrac{(1 + r)^n - 1}{r}$

$FV = PV \times (1 + r)^n$

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Verified step by step guidance

Step 1: Understand the concept of an ordinary annuity. An ordinary annuity is a series of equal payments made at the end of each period over a specified number of periods.

Step 2: Recall the formula for the future value of an ordinary annuity. The future value represents the total value of all payments compounded at the interest rate over the number of periods.

Step 3: The correct formula for the future value of an ordinary annuity is: FV = PMT × ( (1 + r)^n - 1 ) / r. Here, PMT is the periodic payment, r is the interest rate per period, and n is the number of periods.

Step 4: Compare the given options to identify the correct formula. The correct formula matches the first option: FV = PMT × ( (1 + r)^n - 1 ) / r.

Step 5: Note that the other formulas provided in the options are either for different financial calculations (e.g., present value of an annuity) or are incorrect representations of the future value formula.