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Economics
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For a given positive future value, why does compounding monthly result in a lower present value than compounding annually does?

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Related questions

If one country has a per capita income of $15, 000 and its economic growth rate is 5 percent per year, what will it's per capita income be in 10 years? About how many years will it take to catch up to a country where the per capita income is $30, 000 per year and the economic growth rate is 1 percent per year?

(Hint: Using annual compounding, future value = present value - (1 + rt), where r is the growth rate, t is the number of periods.)

The following are all True and False Questions:

1. Book Value represents the remaining underpreciated investment on the books after the depreciation charges to date have been subtracted

2. For the same interest rate, compounding interest does not always yield a larger future worth value than a simple interest rate

3. For any project, if its present worth is negative, the project will be rejected

4. The capatalized cost of a finite-life alternative can be obtained by calculating its annual worth over one life cycle and then multiplying by the interest rate

5. The depreciation amount is not directly included in CFBT (Cash Flow Before Tax), but depreciation is directly invlolved in the taxable calculation

6. Using incremental analysis of alternatives, the alternatice with the highest B/C ratio is selected.

7. Plotting PW vs i can be used to determine the IRR for a given project.

8. In conducting an incremental analysis, at any round, two alternatives can be compared and the alternative with the highest internal rate of return can be selected for comparison in the next round.

1. How does an increase in interest rates affect the present value of a future payment?

2. How does an increase in the size of a future payment affect the present value of a future payment?

3. Two payments of $1,000 are to be made. One of them will be paid one year from today and the other will be paid two years from today. Which has the greater present value? Why?

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