Business, 21.05.2020 21:00 torrejes241

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future value that Janet will have at the end of 10 years, given that end-of-period deposits are made and no interest is withdrawn, if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 annually.

(2) $150 is deposited semiannually and the credit union pays interest semiannually.

(3) $75 is deposited quarterly and the credit union pays interest quarterly.

b. Use your finding in part a to discuss the effect of more frequent deposits and compounding of interest on the future value of an annuity.

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Annuities and compounding

Janet Boyle intends to deposit $300 per year in a credit unio...

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