(Related to Checkpoint 5.2)

(Compoundinterest with non-annual periods)

You just received a bonus of $5,000.

a.Calculate the future value of $5,000, given that it will be held in the bank for 5 years and earn an annual interest rate of 6 percent.

b.Recalculate part (a) using a compounding period that is (1) semiannual and (2) bimonthly.

c.Recalculate parts (a) and (b) using an annual interest rate of 12 percent.

d.Recalculate part (a) using a time horizon of 12 years at an annual interest rate of 6

percent.

e.What conclusions can you draw when you compare the answers in parts (c) and (d) with the answers in parts (a)

and (b)?