Compound interest with nonannual periods

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(Compound interest with nonannual periods?)

a. Calculate the future sum of ?$4,000 ?, given that it will be held in the bank 8 years at an annual interest rate of 4 percent.

b. Recalculate part? (a) using compounding periods that are? (1) semiannual and? (2) bimonthly? (every two? months).

c. Recalculate parts? (a) and? (b) for a 8 percent annual interest rate. d. Recalculate part? (a) using a time horizon of 16 years? (annual interest rate is still 4 ?percent).

e. With respect to the effect of changes in the stated interest rate and holding periods on future sums in parts? (c) and? (d), what conclusions do you draw when you compare these figures with the answers found in parts? (a) and? (b)?

Reference no: EM131307876


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