The more frequent the compounding the....
lesser the future value
greater the amount deposited
greater the present value
greater the effective interest rate
THE MORE FREQUENT THE COMPOUNDING, THE GREATER THE EFFECTIVE INTEREST RATE
CORRECT ANSWER : LAST OPTION : greater the effective interest rate (THUMBS UP PLEASE)
effective interest rate = (1 + r/m)m - 1
so more frequent compounding leads to higher effective rate
The more frequent the compounding the.... lesser the future value greater the amount deposited greater the...
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Changing compounding frequency Using annual, semiannual, and quarterly compounding periods, (1) calculate the future value if $6,000 is deposited initially at 11% annual interest for 7 years, and (2) determine the effective annual rate (EAR) Annual Compounding (1) The future value, Vn, is (Round to the nearest cent.) 2) If the 11% annual nominal rate is compounded annually the EAR is 96 Round to two decimal places Semiannual Compounding (1) The future value, Vn, is (Round to the nearest cent.)...
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7. (a) Will the future value be larger or smaller if we compound an initial amount more often than annually--for example, every 6 months, or semiannually - holding the stated interest rate constant? Explain your answer. (b-1) What is the future value of $200 after three years under 12% semiannual compounding? (b-2) What is the effective annual rate for 12% interest with semiannual compounding? (C-1) What is the future value of $200 after three years under 12% quarterly compounding?) (c-2)...
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Calculate the future value in 5 years of $2100 today with annual compounding and a 10% annual interest rate. Suppose someone saves $1000 today and will have $1052 one year from today. If compounding is daily (assume 365 days in a year), what must be the interest rate on this account? Jane offers Kathy the following deal. Jane will give Kathy $900 today if Kathy gives Jane $1100 in 2 years-time. Suppose there is quarterly compounding and the quarterly interest...