Final answer:
The effective annual yield for a savings account with an 8% interest rate compounded monthly is approximately 8.30%.
Step-by-step explanation:
The question pertains to calculating the effective annual yield (EAY) for a savings account with interest compounded monthly. To find the EAY, we use the formula:
EAY = (1 + r/n)n - 1
where:
- r is the annual nominal interest rate (0.08 in this case for 8%),
- n is the number of compounding periods per year (12 for monthly compounding).
Plugging the values into the formula, we get:
EAY = (1 + 0.08/12)12 - 1
EAY = (1 + 0.0066667)12 - 1
EAY = 1.006666712 - 1
EAY ≈ 0.0830 or 8.30%
The effective annual yield for the savings account with an 8% interest rate compounded monthly is approximately 8.30%.