Future value of ordinary annuities

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Reference no: EM131813059

Future value of an annuity

Find the future values of the following ordinary annuities:

FV of $800 paid each 6 months for 5 years at a nominal rate of 12% compounded semiannually. Round your answer to the nearest cent.

FV of $400 paid each 3 months for 5 years at a nominal rate of 12% 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?

-Select-The nominal deposits into the annuity in part (b) are greater than the nominal deposits into the annuity in part (a).The annuity in part (a) is compounded less frequently; therefore, more interest is earned on previously-earned interest.The annuity in part (a) is compounded more frequently; therefore, more interest is earned on previously-earned interest.The annuity in part (b) is compounded less frequently; therefore, more interest is earned on previously-earned interest.The annuity in part (b) is compounded more frequently; therefore, more interest is earned on previously-earned interest.

Reference no: EM131813059

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