What equation is used to calculate the future value of an investment?

The equation used to calculate the future value of an investment is expressed as (FV = PV(1 + r)^n). In this formula, (FV) stands for the future value, (PV) represents the present value of the investment, (r) is the interest rate (or the rate of return) per period, and (n) is the number of compounding periods.

This equation effectively shows how the present value of an investment grows over time due to compound interest. By multiplying the present value by the term ((1 + r)^n), the formula captures the growth of the investment, reflecting the effects of reinvesting earnings at the same rate of return. This is a fundamental concept in finance, particularly when evaluating investment opportunities and understanding the time value of money.

In contrast, the other options do not represent the future value calculation. For instance, one option describes the present value calculation, while another option refers to a measure used in equity analysis rather than investment growth. The future value formula is essential for investors to gauge how much their investments will be worth after some time given a specific growth rate.