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Annual compounding pays more money than daily compounding. (true or false)

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3 votes

Answer:

False

Step-by-step explanation:

To illustrate this effect, consider the following example given the above formula. Assume that an investment of $1 million earns 20% per year. The resulting future value, based on a varying number of compounding periods, is:

Annual compounding (n = 1): FV = $1,000,000 x [1 + (20%/1)] (1 x 1) = $1,200,000

Semi-annual compounding (n = 2): FV = $1,000,000 x [1 + (20%/2)] (2 x 1) = $1,210,000

Quarterly compounding (n = 4): FV = $1,000,000 x [1 + (20%/4)] (4 x 1) = $1,215,506

Monthly compounding (n = 12): FV = $1,000,000 x [1 + (20%/12)] (12 x 1) = $1,219,391

Weekly compounding (n = 52): FV = $1,000,000 x [1 + (20%/52)] (52 x 1) = $1,220,934

Daily compounding (n = 365): FV = $1,000,000 x [1 + (20%/365)] (365 x 1) = $1,221,336

User James Anderson
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8.0k points
5 votes
the right answer is false
User Kuberchaun
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