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Compound interest with annual compounding

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Suppose $10,000 is invested at an interest rate of 8% per annum.

(a) Calculate the future value (FV) using simple interest if the term to maturity is 1 year.

(b) Calculate the future value (FV) using compound interest with annual compounding if the term to maturity is 1 year.

(c) Explain why the answers to (a) and (b) are the same.

(d) Calculate the future value (FV) using simple interest if the term to maturity is 2 years.

(e) Calculate the future value (FV) using compound interest with annual compounding if the term to maturity is 2 years.

(f) Explain why the answers to (d) and (e) are not the same.

Reference no: EM131434622

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