Question

You invest $1600 in an account paying 5% interest compounded daily. What is the account's effective annual yield? Assume 360 days in a year.

The account's effective annual yield is ___% (Round to two decimal places as needed)

Answer 1

5.13%.

Explanation:

Amount accumulated in 1 year

= 1600(1 + 0.05/360)^360

= $1682.03

Account's effective annual yield

= 82.03 * 100 / 1600 %

= 5.13%.