Anthony and Michelle Constantino just got married and received $23,000 in cash gifts for their wedding. How much will they have on their twenty-fifth anniversary if they place half of this money in a fixed-rate investment earning 10 percent compounded annually. Would the future value be larger or smaller if the compounding period was 6 months? How much more or less would they have earned with this shorter compounding period?
Would the future value be larger or smaller if the compounding period was 6 months?
Semi annual compounding future value is larger than annual compunding.
Larger by $7,246 ($131,875-$124,599)
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