Future value for various compounding periods Find the amount to which $500 will grow under each of these conditions: 7% compounded annually for 5 years. Round your answer to the nearest cent. $?? 7% compounded semiannually for 5 years. Round your answer to the nearest cent. $?? 7% compounded quarterly for 5 years. Round your answer to the nearest cent. $?? 7% compounded monthly for 5 years. Round your answer to the nearest cent. $?? 7% compounded daily for 5 years. Round your answer to the nearest cent. $?? Why does the observed pattern of FVs occur? Time Value of Money: Comparing Interest Rates Different compounding periods, are used for different types of investments. In order to properly compare investments or loans with different compounding periods, we need to put them on a common basis. In order to do this, you need to understand the difference between the nominal interest rate (I_NOM) and the effective annual rate (EAR) The interest rate is quoted by borrowers and lenders, and it is also called the annual percentage rate (APR) If the compounding periods for different securities is the same, then you use the APR for comparison. If the securities have different compounding periods, then the must be used for comparison. Here, M is the number of compounding periods per year and I_NOM/M equal to the periodic rate (I_pER). If a lone or investment uses compounding, then the nominal annual rate is also its effective annual rate. However, if compounding occurs more than once a year. EAR is I_NOM Bank 1 lends funds at a nominal rate of 10%. with payments to be made semiannually. Bank 2 requires payments to be made quarterly. If Bank 2 would like to charge the same effective annual rate as Bank 1, what nominal annual rate will they charge their customers? Round your answer to three decimal places. Do not round intermediate calculations. %