Question

Why does the future value of a given amount increase when interest is compounded non-annually as opposed to annually?

Answer 1

Future value of a given amount will be increasing when interest is compounded non annually because it will be compounded for larger number of times and the amount would also be similar and it would be distributed into small packages so when we are compounding it for a larger number of times that it will be offering us with more opportunity of rate of return so it can be said that when interest is compounded annually it would be leading to a higher amount of future value. it can be said that when time period will increase, the overall future value with increase and the number of compounding is also increasing.