Question

Find the annual percentage yield in (APY) in the following situation. A banks offers an APR of 3.7% compounded daily. The annual percentage yield is what percent?

Answer 1

If a banks offers an APR of 3.7% compounded daily. The annual percentage yield (APY) for this situation is 3.84%.

What is the annual percentage yield (APY)?

The formula to calculate APY is:

APY = (1 + (APR / n))^n - 1

Where:

APR = annual percentage rate, which is 3.7% in this case.

n= compounding frequency per year.

Since the interest is compounded daily, there are 365 compounding periods in a year (n = 365).

Substitute the values into the formula:

APY = (1 + (0.037 / 365))^365 - 1

APY ≈ 0.038

APY ≈ 3.8%

Therefore, the annual percentage yield (APY) for this situation is 3.8%.

Answer 2

For this case we can do the following:

`A=1\cdot(1+(0.037)/(365))^(365\cdot1)=1.0376`

Then we can find the APY on this way:

`\text{APY}=(1.0376-1)/(1)\cdot100=3.769`

Rounded would be:

3.77%