ESTION 12 Using the future value table, a student found that the future value am
ID: 2458682 • Letter: E
Question
ESTION 12
Using the future value table, a student found that the future value amount of $1 for 5 years at an annual interest rate of 10% is 1.611. The student also observed that the future value of $1 for 5 years at 10% compounded semiannually is 1.629. This means that
a. the more often the compounding, the higher the future value.
the student was looking in the wrong column; the second amount should be 1.611/2.
there was an error in the table.
when interest is compounded semiannually, more money must be deposited to have a desired ending balance.
A.a. the more often the compounding, the higher the future value.
B.the student was looking in the wrong column; the second amount should be 1.611/2.
C.there was an error in the table.
D.when interest is compounded semiannually, more money must be deposited to have a desired ending balance.
Explanation / Answer
Ans: It means that the more often the compounding, the higher the future value.
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