10-31-2007, 03:03 PM
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#1 |
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Greenhorn
Join Date: Jul 2006
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Math quiz help!!?
A passbook savings account has a rate of 6%. Find the effective annual yield, rounded to the nearest tenth of a percent, if the interest is compounded quarterly.<br />
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10-31-2007, 03:03 PM
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#2 |
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Greenhorn
Join Date: Jul 2006
Posts: 9
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Math quiz help!!?
To find the effective annual yield, or APY, the formula is:
APY=[(1+r/m)^m]-1 **Note** Subtract 1 after doing the power. Do not subtract 1 from "m" for the power"r" is the 6% or .06"m" is the number of compounding times per year, which is 4 Plug in the numbers: APY=[(1+.06/4)^4]-1 APY=.06136 or 6.14% |
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10-31-2007, 03:03 PM
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#3 |
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Greenhorn
Join Date: Jul 2006
Posts: 27
Rep Power: 6 |
Math quiz help!!?
The yield is 6.15%.
6%/4 (quarters) = 1.5% per quarter. ie$100* 1.5% = $1.50 101.50* 1.5% = 1.52 103.52 * 1.5% = 1.55 105.07 * 1.5% = 1.58 ------ total interest 1 yr $6.15 = 6.15 % yield on $100 investment |
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