Final answer:
The APY for a mortgage that charges 0.54% interest per month is approximately 6.69%, calculated by compounding the monthly interest over a year.
Step-by-step explanation:
To calculate the annual percentage yield (APY) from a monthly interest rate, we need to take into account the effect of compounding. With a mortgage that charges 0.54% interest per month, the APY can be found using the formula for compounding interest:
APY = (1 + monthly interest rate)^12 - 1
In this case, APY = (1 + 0.0054)^12 - 1. First, we calculate the monthly interest rate as a decimal, which is 0.54/100 = 0.0054. Then we compound it monthly over the course of a year (which is 12 months) and subtract 1 to find the annual rate. The calculation would be: APY = (1 + 0.0054)^12 - 1 = (1.0054)^12 - 1 ≈ 0.0669 or 6.69%
So, a mortgage that charges 0.54% interest per month has an APY of approximately 6.69%.