NONANNUAL COMPOUNDING

a. You plan to make five deposits of $1,000 each, one every 6 months, with the first payment beingmade in 6months. Youwill thenmake nomore deposits. If the bank pays 4%nominal interest, compounded semiannually, how much will be in your account after 3 years?

b. One year from today you must make a payment of $10,000. To prepare for this payment, you plan to make two equal quarterly deposits (at the end of Quarters 1 and 2) in a bank that pays 4% nominal interest compounded quarterly. How large must each of the two payments be?

AppendixLO1