Question
What is the difference between the present value of a future cash flow that is computed assuming interest is compounded semi-annually versus compounded monthly? The
What is the difference between the present value of a future cash flow that is computed assuming interest is compounded semi-annually versus compounded monthly?
The question cannot be answered without the specific amounts and timings of the cash flows and th relevant interest rates.
The present value of the future cash flow will be lesser with semi-annual compounding than with monthly compounding because more of the future cash flow is interest.
The present value of the future cash flow will be equal using either semi-annual compounding or monthly compounding.
The present value of the future cash flow will be greater with semi-annual compounding than with monthly compounding because less of the future cash flow is interest.
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