Suppose $10,000 is invested at an interest rate of 8% per annum.
(a) Calculate the future value (FV) using simple interest if the term to maturity is 1 year.
(b) Calculate the future value (FV) using compound interest with annual compounding if the term to maturity is 1 year.
(c) Explain why the answers to (a) and (b) are the same.
(d) Calculate the future value (FV) using simple interest if the term to maturity is 2 years.
(e) Calculate the future value (FV) using compound interest with annual compounding if the term to maturity is 2 years.
(f) Explain why the answers to (d) and (e) are not the same.