Question

The more frequently interest is __________ within a given period, the greater the future value.

Answer 1

The more frequently interest is compounded within a given period, the greater the future value. Continuous compounding produces a greater future value than any other compounding frequency. The amount of compound interest accrued on $ 100 compounded at 10% annually will be lower than that on $ 100 compounded at 10% continuously over the same time period. Since the interest-on-interest effect can generate increasingly positive returns based on the initial principal amount.