When Derek was a small child, his grandfather established a trust fund for him to receive $ on his thirty-fifth birthday. Derek just turned 23. What is the value of his trust today if the trust fund earns percent interest? If he had to wait until age 40 to receive the money, what is the present value today of the $ to be received in 17 years?

Richard Gorman is 65 years old and about to retire. He has $681,000 saved to supplement his pension and Social Security and would like to withdraw it in equal annual dollar amounts so that nothing is left after 14 years. How much does he have to withdraw each year if he earns 7 percent on his money?

Anthony and Michelle Constantino just got married and received $29,000 in cash gifts for their wedding. How much will they have on their twenty-fifth anniversary if they place half of this money in a fixed-rate investment earning 10 percent compounded annually? Would the future value be larger or smaller if the compounding period was 6 months? How much more or less would they have earned with this shorter compounding period?

If they place half of this money, PV, in a fixed rate investment earning 10 percent compounded annually, the amount they will have, FV, on their twenty-fifth anniversary is $ ____.

Would the future value be larger or smaller if the compounding period was 6 months?

A. Would the future value be larger or smaller if the compounding period was 6 months?

B. Smaller. The greater the number of compounding periods per year, the smaller the impact of compound interest, all else equal.

C. Equal. The number of compounding periods per year does not influence the future value.