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Determine interest at the same nominal rate

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Find the future values of the following ordinary annuities.

Point 1: FV of $400 each 6 months for 10 years at a nominal rate of 16%, compounded semiannually. Do not round intermediate calculations. Round your answer to the nearest cent.

Point 2: FV of $200 each 3 months for 10 years at a nominal rate of 16%, compounded quarterly. Do not round intermediate calculations. Round your answer to the nearest cent.

Question 1: The annuities described in parts a and b have the same amount of money paid into them during the 10-year period, and both earn interest at the same nominal rate, yet the annuity in part b earns more than the one in part a over the 10 years. Why does this occur?

Reference no: EM132482828

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