Problem 4-18

Future Value of an Annuity for Various Compounding Periods

Find the future values of the following ordinary annuities:

a. FV of $600 paid each 6 months for 7 years at a nominal rate of 8%, compounded semiannually. Round your answer to the nearest cent. $

b. FV of $300 paid each 3 months for 7 years at a nominal rate of 8%, compounded quarterly. Round your answer to the nearest cent. $

c. The annuities described in parts a and b have the same amount of money paid into them during the 7-year period, and both earn interest at the same nominal rate, yet the annuity in part b earns more than the one in part an over the 7 years. Why does this occur?