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Unformatted text preview: through c. LG5 4–36 Comparing compounding periods René Levin wishes to determine the future
value at the end of 2 years of a $15,000 deposit made today into an account
paying a nominal annual rate of 12%.
a. Find the future value of René’s deposit, assuming that interest is
compounded (1) annually, (2) quarterly, (3) monthly, and
b. Compare your findings in part a, and use them to demonstrate the relationship between compounding frequency and future value.
c. What is the maximum future value obtainable given the $15,000 deposit, the
2-year time period, and the 12% nominal annual rate? Use your findings in
part a to explain. 182 PART 2
LG3 Important Financial Concepts LG5 LG6 4–37 Annuities and compounding Janet Boyle intends to deposit $300 per year in a
credit union for the next 10 years, and the credit union pays an annual interest
rate of 8%.
a. Determine the future value that Janet will have at the end of 10 years,
given that end-of-period deposits are made and no interest is withdrawn, if
(1) $300 is deposited annually and the credit union pays interest
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