Compounding frequency, time value, and effective annual rates For each of the cases in the following table

a. Calculate the future value at the end of the specified deposit period

b. Determine the effective annual rate, EAR.

c. Compare the nominal annual rate, r, to the effective annual rate, EAR. What relationship exists between compounding frequency and the nominal and effective annual rates?

Case Amount of initial deposit Nominal annual rate, R Compounding frequency, M (times/year) Deposit period (years)

A $2,400 7% 3 6

B $52,000 13% 6 3

C $1,200 6% 2 11

D $17,000 16% 3 6