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5 December, 18:26

A passbook savings account has a rate of 9 %. find the effective annual yield, rounded to the nearest tenth of a percent, if the interest is compounded monthly.

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Answers (2)
  1. 5 December, 20:07
    0
    9.38%

    Explanation:

    effective annual yield = (1 + monthly rate) ¹² - 1

    where monthly rate = 9% / 12 = 0.0075

    effective annual yield = (1 + 0.0075) ¹² - 1 = 1.0938 - 1 = 0.0938 or 9.38%

    The advantage of compound interest is that earned interest will earn more interest by itself.
  2. 5 December, 20:38
    0
    Calculating Effective Annual Yield

    Y = (1 + (r/n)) ^n-1

    9.381% = 9.4%
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