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

question 5

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 student was looking in the wrong column; the second amount should be 1.611/2.
• B) the more often the compounding, the higher the future value.
• 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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Definitions:

Crespi

Refers to psychologist Leonard Crespi, known for his work in experimental psychology, especially in motivational research involving rewards.

Hunger Rats

Rats that are used in research studies to investigate the physiological, psychological, and behavioral processes related to hunger and satiety.

Reward

A positive reinforcement that increases the likelihood of a behavior being repeated.