# Find the future values of the following ordinary annuities. a. FV of $400 each 6 months for

## Question:

a. FV of $400 each 6 months for 5 years at a nominal rate of 12%, compounded semiannually

b. FV of $200 each 3 months for 5 years at a nominal rate of 12%, compounded quarterly

c. The annuities described in parts a and b have the same total amount of money paid into them during the 5-year period, and both earn interest at the same nominal rate, yet the annuity in part b earns $101.75 more than the one in part a over the 5 years. Why does this occur?

Annuity

An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...

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**Related Book For**

## Corporate Finance A Focused Approach

**ISBN:** 978-1439078082

4th Edition

**Authors:** Michael C. Ehrhardt, Eugene F. Brigham