How is the future value calculated when the present value is known?

The correct formula for calculating future value when the present value is known is F = P(1+i)^n. In this formula, F represents the future value, P is the present value, i is the interest rate per period, and n is the number of periods.

This formula illustrates the process of compounding, where the present value (initial amount) is multiplied by the factor (1+i)^n, which accounts for the growth of that amount over n periods at an interest rate of i. This means that if you start with a certain amount (the present value), you can determine how much it will grow to after a specified number of periods with compound interest applied.

Understanding this formula is key in finance, especially in contexts like investment analysis, savings growth, and financial planning, as it helps individuals and businesses forecast how much their current investments will be worth in the future based on expected growth rates.