Using the Future Value Table, a Student Found That the Future

question 78

Multiple Choice

Using the future value table, a student found that the future value amount of $1 for 5 years at an annual interest rate of 10% is 1.611.The student also observed that the future value of $1 for 5 years at 10% compounded semiannually is 1.629.This means that

• A) the more often the compounding, the higher the future value.
• B) the student was looking in the wrong column; the second amount should be 1.611/2.
• C) there was an error in the table.
• D) when interest is compounded semiannually, more money must be deposited to have a desired ending balance.

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