Answer:
The APY is 14.9%
Explanation:
To find the annual percentage yield we need to compute the effective annual rate of interest.
The Effective annual rate of return(EAR) is the equivalent rate to be paid where compounding is done frequently at period or interval less than a year.
Compounding implies the regular interval when interest is always computed; in this scenario, it is monthly.
The EAR can be worked out as follows
EAR = ( (1+r)^m - 1 ) × 100
r- interest rate per period
m- number of periods in a year
EAR - Effective annual rate
r = 3.5%/3 = 1.167
% per month
m= number of months in a year = 12
EAR =( 1.01167^12-1)× 100 = 14.9%
The APY is 14.9%
This implies the quoted interest rate of 3.5% per quarter is the same as paying 14.9% per year
