B? Let's take a look. Future Value Basics If you choose Option A and invest the total amount at a simple annual rate of 4.5%, the future value of your investment at the end of the first year is $10,450, which of course is calculated by multiplying the principal amount of $10,000 by the interest rate of 4.5% and then adding the interest gained to the principal amount: You can also calculate the total amount of a one-year investment with a simple manipulation of the above equation: Original equation: ($10,000 x 0.045) + $10,000 = $10,450 Manipulation: $10,000 x [(1 x 0.045) + 1] = $10,450 Final equation: $10,000 x (0.045 + 1) = $10,450 The manipulated equation above is simply a removal of the like-variable $10,000 (the principal amount) by dividing the entire original equation by $10,000. If the $10,450 left in your investment account at the end of the first year is left untouched and you invested it at 4.5% for another year, how much would you have? To calculate this, you would take the $10,450 and multiply it again by 1.045 (0.045 +1). At the end of two years, you would have $10,920: Future value of investment at end of second year: = $10,450 x (1+0.045) = $10,920.25 The above calculation, then, is equivalent to the following equation: Future Value = $10,000 x (1+0.045) x (1+0.045) Think back to math class and the rule of exponents, which states that the multiplication of like terms is equivalent to