Reference no: EM131855672
Find the future values of the following ordinary annuities:
FV of $200 paid each 6 months for 5 years at a nominal rate of 4% compounded semiannually. Round your answer to the nearest cent. $
FV of $100 paid each 3 months for 5 years at a nominal rate of 4% compounded quarterly. Round your answer to the nearest cent. $
These annuities receive the same amount of cash during the 5-year period and earn interest at the same nominal rate, yet the annuity in part b ends up larger than the one in part a. Why does this occur?
A) The normal deposits into the annuity in part (b) are greater than the nominal deposits into the annuity in part (a)
B) The annuity in part (a) is compounded less frequently; therefore, more interest is earned upon previously earned interest.
C) The annuity in part (a) is compounded more frequently; therefore more interest is earned on previously earned interest.
D) The annuity in part (b) is compunded less frequently; thereofre more interest is earned on previously earned interest.
E) The annuity in part (b) is compunded more frequenlt; thereofre more interest is earned on previously earned interest.
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