SOLUTION: Hello! I am reviewing future values for my Finance class and am completely befuddled on the logical progression of the time value of money formulas. It has been quite some time si

Question 100918: Hello! I am reviewing future values for my Finance class and am completely befuddled on the logical progression of the time value of money formulas. It has been quite some time since I have taken Algebra, and that is essentially why I can't figure this transformation out.
FV1 = PV + kPV
must transform into:
FV1 = PV(1+k)
I understand the basics cross-multiplying, but cannot for the life of me figure out how the former was transformed into the latter. Your assistance would be greatly appreciated!
Jonathan Pounds

Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
FV1 = PV + kPV
must transform into:
FV1 = PV(1+k)
I understand the basics cross-multiplying, but cannot for the life of me figure out how the former was transformed into the latter. Your assistance would be greatly appreciated!
--------------------
Try it with numbers and you will see that it works.
-------------
The property is called "distribution"
A statement of the property says: Multiplication distributes over addition.
Here it is in symbols: a(b+c) = ab+ac
----------------
Your Problem:
FV1 = PV + kPV
Fv1 = PV(1+k)
-------------------
If PV = 4 and k=3
then FV! = 4+3*4 = 16
--------------------
similarly 4(1+3)= 16
---------
Therefore 4+3*4 = 4(1+3)
-------------------
=================
Cheers,
Stan H.

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