Future Value for Various Compounding Periods

Find the amount to which $650 will grow under each of the following conditions. Do not round intermediate calculations. Round your answers to the nearest cent.

6% compounded annually for 5 years.

$

6% compounded semiannually for 5 years.

$

6% compounded quarterly for 5 years.

$

6% compounded monthly for 5 years.

$

Present Value for Various Compounding Periods

Find the present value of $475 due in the future under each of the following conditions. Do not round intermediate calculations. Round your answers to the nearest cent.

15% nominal rate, semiannual compounding, discounted back 5 years.

$

15% nominal rate, quarterly compounding, discounted back 5 years.

$

15% nominal rate, monthly compounding, discounted back 1 year.

$

Future Value of an Annuity for Various Compounding Periods

Find the future values of the following ordinary annuities.

FV of $800 each 6 months for 9 years at a nominal rate of 16%, compounded semiannually. Do not round intermediate calculations. Round your answer to the nearest cent.

$

FV of $400 each 3 months for 9 years at a nominal rate of 16%, compounded quarterly. Do not round intermediate calculations. Round your answer to the nearest cent.

$

The annuities described in parts a and b have the same amount of money paid into them during the 9-year period, and both earn interest at the same nominal rate, yet the annuity in part b earns more than the one in part a over the 9 years. Why does this occur?

-Select-The nominal deposits into the annuity in part (b) are greater than the nominal deposits into the annuity in part (a).The annuity in part (a) is compounded less frequently; therefore, more interest is earned on interest.The annuity in part (a) is compounded more frequently; therefore, more interest is earned on interest.The annuity in part (b) is compounded less frequently; therefore, more interest is earned on interest.The annuity in part (b) is compounded more frequently; therefore, more interest is earned on interest.