Investments and loans base their interest calculations on one of two possible methods: theinterest and the▼ interest methods. Both methods apply three variables-the amount of principal, the interest rate, and the investment or depositperiod-to the amount deposited or invested in order to compute the amount of interest. However, the two methods differ in their relationshipbetween the variables.Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited orinvested, respectively. Which equation best represents the calculation of a future value (FV) using:Compound interest?FV = (1 + I)N / PVFV = PV x (1 + I)NFV = PV / (1 + I)NSimple interest?O FV = PV + (PV x I X N)FV = PV - (PV x I X N)O FV = PV / (PV x I X N) StatementEverything else held constant, an account that earns compound interest will grow more quickly than an otherwise identicalaccount that earns simple interest.After the end of the second year and all other factors remaining equal, a future value based on compound interest willnever exceed the future value based on simple interest.All other factors being equal, both the simple interest and the compound interest methods will accrue the same amount ofearned interest by the end of the first year.InvestmentLMPInterest Rate and Method5% compound interest4% simple interest7% compound interestTrueExpected Future Value Make this investment?OHeather is willing to invest $30,000 for six years, and is an economically rational investor. She has identified three investment alternatives (L, M, andP) that vary in their method of calculating interest and in the annual interest rate offered. Since she can only make one investment during the six-yearinvestment period, complete the following table and indicate whether Heather should invest in each of the investments.$$FalseNote: When calculating each investment's future value, assume that all interest is earned annually. The final value should be rounded to the nearestwhole dollar.OOO

Investments and loans base their interest calculations on one of two possible methods: the interest and the ▼interest methods. Both methods apply three variables-the amount of principal, the interest rate, and the investment or deposit period to the amount deposited or invested in order to compute the amount of interest. However, the two methods differ in their relationship between the variables. Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited or invested, respectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? O FV = (1 + I)N / PV O FV = PV x (1 + I)N FV = PV / (1 + I)N Simple interest? O FV = PV + (PV XI X N) O FV = PV - (PV XI X N) O FV = PV / (PV x I x N)