Question: Annuities and compounding Janet Boyle intends to deposit $300 per year in a credit union for the next 10 years, and the credit union pays an annual interest rate of 8%.
1) Determine the future value that Janet will have at the end of 10 years, given that end-of-period deposits are made and no interest is withdrawn, if (1) $300 is deposited annually and the credit union pays interest annually (2) $150 is deposited semiannually and the credit union pays interest semiannually (3) $75 is deposited quarterly and the credit union pays interest quarterly.
2) Use your finding in part a to discuss the effect of more frequent deposits and compounding of interest on the future value of an annuity.