Question

Bill is considering a savings account which pays 2% interest compounded monthly. What is the effective annual yield? Enter your response as a percentage rounded to two decimal places and omit the percent sign (7.25% should be input as 7.25.)

Answer 1

2.02

Explanation:

2% annual rate

compound monthly so every month you get 2%/12 =0.167%

effectively in a year = 12 months you'll get

(1+0.167%)^12 = 2.02%

input 2.02