Compounding frequency, time value, and effective annual rates

For each of the cases in the following table,

a.Calculate the future value at the end of the specified deposit period.

b.Determine the effective annual rate, EAR.

c.Compare the nominal annual rate, i, to the effective annual rate, EAR. What relationship exists between compounding frequency and the nominal and effective annual rates?

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a.The future value of case A at the end of year 7 is $_____________(Round to the nearest cent)

Case	Amount of initial deposit	Nominal annual rate, r	Compounding frequency, m (times/year)	Deposit period (years)
A	$2,600	6%	3	7
B	$49,000	11%	4	3
C	$1,100	5%	2	12
D	$21,000	18%	4	7