Question

Jacob Hernandez invests $25,000 in a CD for 5 years. The CD earns interest at an annual rate of 5.5% compounded quarterly. What is the annual percentage yield to the nearest hundredth of a percent?

Answer 1

Below

Explanation:

Each PERIOD is 3 months there is 4 periods per year

periodic interest = .055/4

effective interest per year would then be

(1 + .055/4)^4 - 1 = .056144 = ~ 5.61%