Final answer:
The statement about FVIFA being the future value of a $1 ordinary annuity for n periods at i percent interest is true. FVIFA calculates the future compound interest on an investment over time, considering both the principal and accumulated interest.
Step-by-step explanation:
The statement about Future Value Interest Factor Annuity (FVIFA) is true. FVIFA is indeed the future value of a $1 ordinary annuity for n periods, compounded at i percent interest rate. An ordinary annuity is a series of equal payments made at the end of consecutive periods over a fixed length of time.
When we talk about future value, we are interested in knowing how much an investment will grow over time with compound interest. The compound interest is calculated on the principal amount and the interest that has been added during previous periods. So, the future value of an annuity incorporates the interest earned on both the principal and the compounded interest over time.
Here's the formula to calculate FVIFA:
FVIFA = (1 + i)n - 1 / i
In examples where we're applying this formula, suppose you're making annual payments into an annuity. To find its value in the future after a certain number of years with a specific interest rate, you can use the FVIFA formula. For instance, if the period is 3 years with an interest rate of 5%, plug those values into the formula to find the future value of that annuity.