Assuming equal annual rates, the more frequent the compounding periods in a year, the higher the future value.

Question

Quizplus · Accepted Answer

This is because compounding allows for interest to be earned not only on the principal amount, but also on the accumulated interest. The more frequently interest is compounded, the more opportunities there are for interest to be earned on the accumulated interest, resulting in a higher future value.

Assuming Equal Annual Rates, the More Frequent the Compounding Periods