The greater the number of compounding periods within a year,the greater the future value of a lump sum invested initially,and the greater the present value of a given lump sum to be received at maturity.

Question

Quizplus · Accepted Answer

The greater number of compounding periods within a year increases the future value of a lump sum invested initially due to more frequent application of interest, but it decreases the present value of a given lump sum to be received at maturity because more compounding periods mean a higher effective discount rate is applied to the future value.

The Greater the Number of Compounding Periods Within a Year,the