Future value of interest if it is calculated two times a year can be a classified as__________________?
Correct answer: D. Semiannual compounding
- A. Semiannual discounting
- B. Annual discounting
- C. Annual compounding
- D. Semiannual compounding
Explanation
When interest is calculated twice a year, the annual rate is applied through two compounding periods, which is called semiannual compounding. Discounting instead converts a future value into a present value.
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