A small business operator, Ms Smart, with limited investment opportunities deposits R10,000 into an investment account paying 6% annual interest and

leaves it on deposit for exactly 8 years. How much would be in the account at the end of 8 years if interest is compounded as follows

i. monthly [4 marks]

ii. semi-annually [4 marks]

iii. Calculate the effective annual rate (EAR) for (i) and (ii) [6 marks]

iv. Based on your findings in parts (i) to (iv), what is the general relationship between frequency of compounding and the EAR? [4 marks]