René Levin wishes to determine the future value at the end of 2 years of a $15,000 deposit made today into an account paying a nominal annual rate of 12%.
a. Find the future value of René's deposit, assuming that interest is compounded
(1) Annually,
(2) Quarterly,
(3) Monthly, and
(4) Continuously.
b. Compare your findings in part a, and use them to demonstrate the relationship between compounding frequency and future value.
c. What is the maximum future value obtainable given the $15,000 deposit, the 2-year time period, and the 12% nominal annual rate? Use your findings in part a to explain.