The less frequent is the compounding the lower is the future value of the investment for a given interest rate. True False
Question
The less frequent is the compounding the lower is the future value of the investment for a given interest rate. True False
Solution
True. The less frequent the compounding, the lower the future value of the investment for a given interest rate. This is because compounding refers to the process of earning interest on both the initial investment and the interest previously earned. The more frequently interest is compounded, the more interest will be earned on the investment.
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