Future Value of an Ordinary Annuity

Future Value of an Annuity for Various Compounding Periods

Find the future values of the following ordinary annuities:

FV of $200 paid each 6 months for 8 years at a nominal rate of 12%, compounded semiannually. Round your answer to the nearest cent.

$ 

FV of $100 paid each 3 months for 8 years at a nominal rate of 12%, compounded quarterly. Round your answer to the nearest cent.

$ 

The annuities described in parts a and b have the same amount of money paid into them during the 8-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 8 years. 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 interest. The annuity in part (a) is compounded more frequently; therefore, more interest is earned on interest. The annuity in part (b) is compounded less frequently; therefore, more interest is earned on interest. The annuity in part (b) is compounded more frequently; therefore, more interest is earned on interest. Item 3