Future value for various compounding periods Find the amount to which $600 will
ID: 2811076 • Letter: F
Question
Future value for various compounding periods Find the amount to which $600 will grow under each of these conditions: a. 8% compounded annually for 10 years. Do not round intermediate calculations. Round your answer to the nearest cent. b, 8% compounded semiannually for 10 years. Do not round intermediate calculations. Round your answer to the nearest cent c. 8% compounded quarterly for 10 years. Do not round intermediate calculations. Round your answer to the nearest cent. d, 8% compounded monthly for 10 years. Do not round intermediate calculations, Round your answer to the nearest cent. e. 8% compounded daily for 10 years. Do not round intermediate calculations. Round your answer to the nearest cent. f. Why does the observed pattern of FVs occur? -Select- The future values increase because as compounding periods per year increase, interest is earned on interest less frequently The future values decrease because as compounding periods per year increase, interest is earned on interest more frequently The future values increase because as compounding periods per year increase, interest is earned on interest more frequently The future values increase because as compounding periods per year decrease, interest is earned on interest more frequently The future values decrease because as compounding periods per year decrease, interest is earned on interest more frequentlyExplanation / Answer
Future value = Present value x (1+Rate/frequency)^(Years x frequency)
a.
Future value = 600*(1+8%/1)^(10 x 1) = $1,295.35
b.
Future value = 600*(1+8%/2)^(10 x 2) = $1,314.67
c.
Future value = 600*(1+8%/4)^(10 x 4) = $1,324.82
d.
Future value = 600*(1+8%/12)^(10 x 12) = $1,331.78
e.
Future value = 600*(1+8%/365)^(10 x 365) = $1,335.21
f.
Third option is correct option.
Correct option is > The future values increase because a compounding periods per year increase, interest is earned on interest more frequently
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