Answer:
a). Future value=$8,811.71
effective annual rate is=12%
B. Future value =$8,954.23
effective annual rate=12.36%
C Future value quarterly=$9,030.56
effective annual rate=12.55%
Explanation:
The formula to be used =
FV = PV (1 + r/m)^mn
FV = Future value
PV = Present value = $5,000
R = interest rate = 12%
M = number of compounding per year
N = number of years = 5
Formula for effective annual rate = (1 + r/m) ^m - 1
1. Annual compounding
$5,000 x (1 + 0.12)^5 = $8811.71
EAR = (1.12)^1- 1 = 0.12= 12%
2. semiannual
$5,000 x (1 + 0.12 /2)^10 = $8954.24
EAR =(1 + 0.12 / 2 )^2- 1 = 0.1236 = 12.36%
quarterly
$5,000 x (1 + 0.12 /4) ^ 20=$9,030.56
EAR = (1 + 0.12 / 4 )^4 - 1 = 12.55%
I hope my answer helps you
