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Question: Compound interest with non-annual periods. You just received a bonus of $4,000.

a. Calculate the future value of $4,000, given that it will be held in the bank for 8 years and earn an annual interest rate of 4 percent.

b. Recalculate part (a) using a compounding period that is (1) semiannual and (2) bimonthly.

c. Recalculate parts (a) and (b) using an annual interest rate of 8 percent.

d. Recalculate part (a) using a time horizon of 16 years at an annual interest rate of 4 percent.

e. What conclusions can you draw when you compare the answers in parts (c) and (d) with the answers in parts (a) and (b)?

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Category:- Basic Finance
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