Question: Variable Relationships and Future Value Consider an investment that pays $1000 today that is deposited in an account the grows over the next 5 years.

Variable Relationships and Future Value

Consider an investment that pays $1000 today that is deposited in an account the grows over the next 5 years. Assume semi-annual compounding (m=2) with an annual interest rate of 12%. Calculate the future value.

Now increase the compounding periods per year using monthly compounding (m=12). Solve for the new future value.

Which of the following are true?

		When the compounding periods per year increases, the future value is unchanged
		When the compounding periods per year increases, the future value decreases
		When the compounding periods per year increases, the present value increases
		When the compounding periods per year increases, the future value increases

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