Question

Amanda's bank offers a savings account with a 2.8% APR, compounded monthly. What is the actual annual percentage yield on this account?

Answer 1

it is a. 2.84 percent

Answer 2

The actual annual percentage yield is 2.84 %

Explanation:

Since, the actual annual yield rate is,

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

Where, r is the stated annual interest rate,

n is the number of compounding periods per year,

Here, r = 2.8 % = 0.028,

And, n = 12

Thus, the actual annual yield rate is,

`i=(1+(0.028)/(12))^(12)-1`

`=0.0283621428759\approx 0.0284`

Hence, the actual annual percentage yield is 2.84 % ( approx ).