Find the future values of the following ordinary annuities: a. FV of $800 paid each 6 months for 5 years at a nominal rate of 11% compounded semiannually. Do not round intermediate calculations. Round your answer to the nearest cent. $ b. FV of $400 paid each 3 months for 5 years at a nominal rate of 11% compounded quarterly. Do not round intermediate calculations. Round your answer the nearest cent. $ c. 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-
Find the future values of the following ordinary annuities: a. FV of $800 paid each 6 months for 5 years at a nominal rate of 11% compounded semiannually. Do not round intermediate calculations. Round your answer to the nearest cent. $ b. FV of $400 paid each 3 months for 5 years at a nominal rate of 11% compounded quarterly. Do not round intermediate calculations. Round your answer the nearest cent. $ c. 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-
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![Find the future values of the following ordinary annuities:
a. FV of $800 paid each 6 months for 5 years at a nominal rate of 11% compounded semiannually. Do not round intermediate calculations. Round your answer to the nearest cent.
$
b. FV of $400 paid each 3 months for 5 years at a nominal rate of 11% compounded quarterly. Do not round intermediate calculations. Round your answer to the nearest cent.
$
c. 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-](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fea7f9626-cbeb-40dd-89e8-5820cd6fdc7e%2Ff4053052-c612-42e7-99e5-fe63f55ea04a%2Fjhr2vvf_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Find the future values of the following ordinary annuities:
a. FV of $800 paid each 6 months for 5 years at a nominal rate of 11% compounded semiannually. Do not round intermediate calculations. Round your answer to the nearest cent.
$
b. FV of $400 paid each 3 months for 5 years at a nominal rate of 11% compounded quarterly. Do not round intermediate calculations. Round your answer to the nearest cent.
$
c. 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-
Expert Solution
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Step 1
The future value of an annuity refers to the accumulated value of its cash flows assuming they are invested at a fixed rate. It allows investors to value their holdings. It uses TVM in its calculations.
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