Problem 5-23 Future value for various compounding periods Find the amount to whi

Question

Problem 5-23
Future value for various compounding periods

Find the amount to which $500 will grow under each of these conditions:

12% compounded annually for 5 years. Round your answer to the nearest cent.
$??

12% compounded semiannually for 5 years. Round your answer to the nearest cent.
$??

12% compounded quarterly for 5 years. Round your answer to the nearest cent.
$??

12% compounded monthly for 5 years. Round your answer to the nearest cent.
$??

12% compounded daily for 5 years. Round your answer to the nearest cent.
$??

Why does the observed pattern of FVs occur?

Explanation / Answer

Future value for various compounding periods

Find the amount to which $500 will grow under each of these conditions:

12% compounded annually for 5 years. Round your answer to the nearest cent.

Future value = 500*(1+12%)^5

Future value = $ 881.17

12% compounded semiannually for 5 years. Round your answer to the nearest cent.

Future value = 500*(1+12%/2)^(5 *2)

Future value = $ 895.42

12% compounded quarterly for 5 years. Round your answer to the nearest cent.

Future value = 500*(1+12%/4)^(5 *4)

Future value = $ 903.06

12% compounded monthly for 5 years. Round your answer to the nearest cent.

Future value = 500*(1+12%/12)^(5 *12)

Future value = $ 908.35

12% compounded daily for 5 years. Round your answer to the nearest cent.

Future value = 500*(1+12%/365)^(5 *365)

Future value = $ 910.97

Why does the observed pattern of FVs occur?

The observed pattern of FVs occur due to change in compounded period i.e interest is grow more if the compunded interest grow frequentlly than interest grow less frequently, The pattern occur the frequency of growth rate is faster than previous one.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.