Question

Find the future values of the following ordinary annuities:
a. FV of $400 each six months for five years at a simple rate of 12 percent, compounded semiannually
b. FV of $200 each three months for five years at a simple rate of 12 percent, compounded quarterly
c. The annuities described in parts (a) and (b) have the same amount of money paid into them during the five-year period and both earn interest at the same simple rate, yet the annuity in part (b) earns $101.75 more than the one in part (a) over the five years. Why does this occur?



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  • CreatedNovember 24, 2014
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