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Compounding frequency, time value, and effective annual rates For each of the cases in the following table, : a. Calculate the future value at the
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 A B Compounding frequency, Deposit Amount of Nominal m period initial deposit annual rate, r (times/year) (years) $2,700 8% 3 5 $52,000 12% 4 3 $900 7% 2 12 $21,000 15% 4 8 D
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