Originally Posted by

**solvj** Just to see where you're at, do you agree with following:

> 6. Assume that 0<i<1.

12% annual compounded monthly means i = .01,

and 1.01^12 is the future value of $1 after 1 year,

and the effective annual rate becomes 12.6825%

>a) (1+i)^t < 1+it for 0<t<1

If rate = 12% compounded annually, then i = .12, and above means

the future value of $1 after a period of time less than 1 year.

> b) (1+i)^t > 1+it for 1<t

If rate = 12% compounded annually, then i = .12, and above means

the future value of $1 after a period of time greater than 1 year, and

if the future value is to be after 3 years and 7 months, then the

value of t would be 3 + 7/12 = 43/12.