Question

find the future values of the following ordinary annuities:

a) FV of $600 paid each 6 months for 5 years at a nominal rate of 6% compounded semiannually. Do not round intermediate calculations. Round your answer to the nearest cent.

b) FV of $300 paid each 3 months for 5 years at a nominal rate of 6% compounded quarterly. do not round intermediate calculations. round your answer to the nearest cent.

c) these annuities recieve the same amount of cash during the 5-year period and earn interest at the same nominal rate, yet the annuity in part b ends up larger than the one on part a, why does this occur?

Answer 1

Answer:

QUESTION C

Despite the fact that the annuities are similar, the nominal interest rate likewise stays consistent yet the compounding periods are higher which makes a difference here. If the compounding periods increase, the future value of annuity will also tend to increase.

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