What is the future value of $1 after 3 years at an annual interest rate of 100% with annual compounding?

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Multiple Choice

What is the future value of $1 after 3 years at an annual interest rate of 100% with annual compounding?

Explanation:
With compound interest, the amount grows by a factor of (1 plus the annual rate) each year. An annual rate of 100% means the money doubles every year. Starting with $1, after one year you have $2, after two years $4, and after three years $8. Using the formula FV = PV(1 + r)^n gives FV = 1 × (1 + 1)^3 = 8. So the future value is $8.

With compound interest, the amount grows by a factor of (1 plus the annual rate) each year. An annual rate of 100% means the money doubles every year. Starting with $1, after one year you have $2, after two years $4, and after three years $8. Using the formula FV = PV(1 + r)^n gives FV = 1 × (1 + 1)^3 = 8. So the future value is $8.

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