Question

If the APR of a savings account is 5.3% and interest is compounded quarterly,

what is the approximate APY of the account?
O
A 5.41%
OB. 6,56%
O C. 1.05%
OD 5%

Answer 1

5.41%

Explanation:

Let us assume that x amount is invested in a savings account with APR 5.3% and the interest is compounded quarterly.

Then the quarterly percentage rate is
`(5.3)/(4) =1.325`%.

Therefore, the amount x will become after one year

`x[1+ (1.325)/(100) ]^(4)  = 1.0541x`

Therefore, the annual percentage yeild will be
`((1.0541x - x) * 100)/(x)` % = 5.41%. ( Answer )