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

Question

Quizplus · Accepted Answer

The higher future value with semiannual compounding indicates that more frequent compounding results in a higher future value. This is because compounding more frequently allows for earning interest on interest, resulting in a higher return.

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