Question

Marit Brunsell deposited $80,000 at Bank of America at 12% interest compounded quarterly. What is the effective rate (APY)? (Do not round intermediate calculations. Round your answer to the nearest hundredth percent.)

Answer 1

Answer:

12.55%

Explanation:

APY = $(1 + \frac{r}{n} )^{n}$ - 1

Where;

r = 12% = 0.12

n = 4, As the rate is compounded quarterly so n will be 4 per year.

APY = $(1 + \frac{0.12}{4} )^{4} -1$

APY = $(1 + 0.03)^{4} -1$

APY = $(1.03)^{4} -1$

APY = 1.12550881 - 1

APY = 0.12550881

or

APY = 12.55%