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

Question

asked Nov 2, 2018 305 views

2 Answers

Fedeco · Answer 1 · 2018-11-07T21:28:32+0000

Answer:

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 ).