You have $25,000 in an investment account today. How much will be in the account

Question

You have $25,000 in an investment account today. How much will be in the account in 30 years if the account earns (a) 8% per year, (b) 8% compounded semiannually, (c) 8% compounded quarterly, (d) 8% compounded monthly, and (e) 8% compounded daily? Comment on the effect of more frequent compounding.

Explanation / Answer

a> FV=25000*(1.08)^30 251566.42 b>FV=25000(1.04)^(30*2) 262990.69 c>FV=25000*(1.02)^(30*4) 269129.08 d>FV=25000*(1.0066)^(30*12) 266952.13 e>FV=25000*(1.000219)^(30*365) 274970.35 FV =Future Value increases with frequency of compounding

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