You have $25,000 in an investment account today. How much will be in t

You have $25,000 in an investment account today. How much will be in the account in 30 years if the account
earns (a) 8% per year, (b) 8% compounded semiannually, (c) 8% compounded quarterly, (d) 8% compounded
monthly, and (e) 8% compounded daily?

Comment on the effect of more frequent compounding.

ANSWER

(a) $251,566.42, (b) 262,990.69, (c) $269,129.08, (d) $273,393.24, (e) $275,506.95 The more frequent the compounding the
higher the future value. However, there are diminishing returns.