Anthony and Michelle Constantino just got married and received $28,000 in cash gifts for their wedding. How much will they have on their twenty-fifth anniversary if they place half of this money in a fixed-rate investment earning 10 percent compounded annually? Would the future value be larger or smaller if the compounding period was 6 months? How much more or less would they have earned with this shorter compounding period?

Part 1

If they place half of this money, PV, in a fixed-rate investment earning 10 percent compounded annually, the amount they will have, FV, on their twenty-fifth anniversary is $151685.88

Part 2

Would the future value be larger or smaller if the compounding period was 6 months?

B. Larger. The greater the number of compounding periods per year, the larger the impact of compound interest, all else equal - This is the correct answer.

Part 3

With this shorter compounding period, the additional amount they would have earned is $ ???