Question
1. You currently have AED40,000 and plans to purchase a 5-year certificate of deposit (CD). a. How much will you have when the CD matures
1. You currently have AED40,000 and plans to purchase a 5-year certificate of deposit (CD).
a. How much will you have when the CD matures if it pays 7% interest, compounded annually?
b. How much will you have when the CD matures if it pays 6%, or 20% interest, compounded annually?
c. How much will you have when the CD matures if it pays 6%, or 20% interest, compounded semiannually?
d. Why does the annual compounding and semiannual compounding give different answers?
Would you prefer annual compounding or semiannual compounding or quarterly compounding for your investments?
e. How much will you have when the CD matures if you purchase a 10-year CD that pays 7% interest, compounded annually?
f. Do you observe any relationship between the period of investment and the future value?
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