Final answer:
To find the annual yield of a 6-month CD compounded monthly at a rate of 7.0%, we use the formula for effective annual yield. Plugging in the values, the annual yield is approximately 8.97%.
Step-by-step explanation:
To find the annual yield of a 6-month CD compounded monthly at a rate of 7.0%, we need to calculate the effective annual yield. In order to do this, we can use the formula:
Effective annual yield = (1 + (r/n))^n - 1
where r is the annual interest rate and n is the number of compounding periods in a year.
For this CD, r = 7%, and n = 12 (since it is compounded monthly). Plugging these values into the formula, we get:
Effective annual yield = (1 + (0.07/12))^12 - 1
= (1.00583333333)^12 - 1
= 0.907374542 - 1
= 0.0897374542
Multiplying by 100 to convert to percentage, the annual yield is approximately 8.97%.