Question

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1. Effects of different compounding periods on future values of $1,000 invested at an 15% nominal interest rate.

Initial Amount	Compounding periods	Effective annual rate	FV at end of 1 year
$1,000	Annually
$1,000	Semiannually
$1,000	Quarterly
$1,000	Monthly
$1,000	Daily (365 days)

Answer 1

Initial amount	Compounding periods	Effective annual rate	FV at end of 1 Year
		Calculation	EAR
$                  1,000	Annually		15.00%	$       1,150.00
$                  1,000	Semiannually	=(1+0.15/2)^2-1 =	15.56%	$       1,155.63
$                  1,000	Quarterly	=(1+0.15/4)^4-1 =	15.87%	$       1,158.65
$                  1,000	Monthly	=(1+0.15/12)^12-1 =	16.08%	$       1,160.75
$                  1,000	Daily	=(1+0.15/365)^365-1 =	16.18%	$       1,161.80