Janet Boyle intends to deposit $300 per year in a credit union for the next 10 years,
Question:
Janet Boyle intends to deposit $300 per year in a credit union for the next 10 years, and the credit union pays an annual interest rate of 8%.
a. Determine the future value that Janet will have at the end of 10 years, given that end-of-period deposits are made and no interest is withdrawn, if
(1) $300 is deposited annually and the credit union pays interest annually.
(2) $150 is deposited semiannually and the credit union pays interest semiannually.
(3) $75 is deposited quarterly and the credit union pays interest quarterly.
b. Use your finding in part a to discuss the effect of more frequent deposits and compounding of interest on the future value of an annuity.
Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will... Future Value
Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth...
Step by Step Answer:
a 1 Annual N 10 I 8 PMT 300 Solve for FV 434597 2 Semiannual N 10 2 20 I 8 2 4 PMT 300 2 1...View the full answer
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
