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The process for converting present values into future values is called compounding. This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables?

a. The trend between the present and future values of an investment
b. The interest rate (I) that could be earned by deposited funds
c. The duration of the deposit (N)
d. The present value (PV) of the amount deposited

Respuesta :

Answer:

The correct answer is letter "A": The trend between the present and future values of an investment.

Explanation:

Compounding is the process in which earnings of an investment are reinvested to earn more profits in a determined period of time. In other words, present values are used to convert them into future values expecting they will be higher. Compounding can also be defined as interest on interest.

To compute compounding figures it is necessary the interest rate that could be earned out of an investment and its duration and the present value of the investment in dollars quantity.

Thus, the trend between the present and future value of the investment remains useless for compounding.

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