Question

A bank offers an APR of 6.4% compounded daily. The annual percentage yield is what percentage?

Answer 1

The annual percentage yield is 6.609%.

Explanation:

The annual percentage yield is calculated by:

APY =
`(1+(r)/(n) )^(n) -1`

where r is the percentage rate and n refers to the number of times compounded.

So, r =
`(6.4)/(100)` = 0.064

Since the APR is compounded daily,

n = 365

Now,

APY =
`(1+(0.064)/(365) )^(365) -1`

= 6.609% approximately

Answer 2

The annual percentage yield is 6.609%

Explanation:

Let's assume

amount invested=$1

so, P=1

APR of 6.4% compounded daily

so, r=6.4%=0.064

n=365

t=1

now, we can use formula

`A=P(1+(r)/(n))^(nt)`

now, we ca plug values

`A=1(1+(0.064)/(365))^(365* 1)`

we get

`A=1.06609`

now, we can find APY

`APY=(A-P)/(P)* 100`

now, we can plug values

`APY=(1.06609-1)/(1)* 100`

we get

APY is 6.609%