1. How does monthly compounding compare to daily compounding?
2. How does annual compounding compare to semiannual compounding?
3. Does IRR take into account the time value of money?
4. A friend asks whether he should open a savings account that pays 5 percent interest compounded semiannually or one that pays 5 percent interest compounded daily? What would you tell him or her, and why? Be sure to explain the role that the time value of money plays in your response.