Question

The APR of Vinny's savings account is 3.5%, but interest is compounded only once a year. What is the APY of Vinny's savings account?

Answer 1

Annual Percentage Yield of Vinny's savings account is equal to 3.5% same as the Annual Percentage Rate since the interest rate is compounded only once a year. Compounding interest once a year is equal to interest rate per year. 

Answer 2

We have been given that the APR of Vinny's savings account is 3.5%, but interest is compounded only once a year. Wee are asked to find the Annual percentage yield of Vinny's savings account.

We will APY formula to solve our given problem.

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

r = Annual percentage rate in decimal form,

n = Number of times interest is compounded per year.

`3.5\%=(3.5)/(100)=0.035`

Since interest is compounded per year, so
`n=1`.

`APY=(1+(0.035)/(1))^1-1`

`APY=(1+0.035)-1`

`APY=(1.035)-1`

`APY=0.035`

Upon converting 0.035 to percent, we will get
`3.5%`%.

Therefore, APY of Vinny's savings account is 3.5%.