Question

Find the amount to which $800 will grow under each of these conditions:

1. 5% compounded annually for 6 years. Do not round intermediate calculations. Round your answer to the nearest cent.
   $  

2. 5% compounded semiannually for 6 years. Do not round intermediate calculations. Round your answer to the nearest cent.
   $  

3. 5% compounded quarterly for 6 years. Do not round intermediate calculations. Round your answer to the nearest cent.
   $  

4. 5% compounded monthly for 6 years. Do not round intermediate calculations. Round your answer to the nearest cent.
   $  

5. 5% compounded daily for 6 years. Do not round intermediate calculations. Round your answer to the nearest cent.
   $  

6. Why does the observed pattern of FVs occur?

Answer 1

a) With annual compounding FV = PV*(1+r)⁶ = 800*(1+5%)⁶ = 1072.08
b) With semiannual compounding FV =PV*(1+r/2)^2*6 = 800*(1+5%/2)^6*2 = 1075.91
c) With quarterly compounding  FV =PV*(1+r/4)^4*6 = 800*(1+5%/4)^6*4 = 1077.88
d) With monthly compounding  FV =PV*(1+r/12)^6*12 = 800*(1+5%/12)^6*12 = 1079.21
e)  With daily compounding  FV =PV*(1+r/365)^365*6= 800*(1+5%/365)^6*365 = 1079.86
f) with continuous compounding FV = PV* e^rtb= 800*e^5%*6 = 1079.88

Higher the compounding higher the Future Value.

Please Discuss in case of Doubt

Best of Luck. God Bless
Please Rate Well