(Calculating compound interest with non-annual periods) (Related to Checkpoint 5.3 on page 170) Your grandmother just gave you $6,000. You’d like to see how much it might grow if you invest it.

a. Calculate the future value of $6,000, given that it will be invested for five years at an annual interest rate of 6 percent.

b. Recalculate part a using a compounding period that is (1) semiannual and

(2) bimonthly.

c. Now let’s look at what might happen if you can invest the money at a 12 percent rate rather than a 6 percent rate; recalculate parts a and b for a 12 percent annual interest rate.

d. Now let’s see what might happen if you invest the money for 12 years rather than 5 years; recalculate part a using a time horizon of 12 years (the annual interest rate is still 6 percent).

e. With respect to the changes in the stated interest rate and the length of time the money is invested in parts c and

d, what conclusions can you draw?