Consider an investment with the following terms: you will invest money now, and receive no payments until 5 years from now, when you will receive $2,500, which includes all principal and interest. Assume an annual percentage rate of 5%.

a. What amount would you pay for this investment if interest is compounded annually? Show your work as an equation or using the PV function.

b. What amount would you pay for this investment if interest is compounded semiannually? Show your work as an equation or using the PV function.

c. What amount would you pay for this investment if interest is compounded monthly? Show your work as an equation or using the PV function.

Answer rating: 100% (QA)

To determine the amount you would pay for the investment under different compounding frequencies we ... View the full answer