Question

Find the annual percentage yield of a saving account that pays 2.75% compounded quarterly

Answer 1

Answer:

The annual percentage yield is of 2.78%.

Step-by-step explanation:

Annual percentage yield of an account:

The annual percentage yield of an account compounded n times during the year with a decimal interest rate of r is given by:

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

Pays 2.75% compounded quarterly

This means that $r = 0.0275, n = 4$. So

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

$Y = (1+\frac{0.0275}{4})^4 - 1$

$Y = 0.0278$

0.0278 = 2.78%

The annual percentage yield is of 2.78%.