Question

Determine the annual percentage yield, or the effective interest rate, for $700 invested at 3.55% over 10 years compounded daily. Round your answer to the nearest hundredth of a percent, if necessary.

Answer 1

To find the annual percentage yield or effective interest rate of $700 invested at 3.55% over 10 years compounded daily, use the formula APY = (1 + (annual interest rate / number of compounding periods))^(number of compounding periods) - 1. Plug in the values and solve to find an APY of approximately 0.035816.

Step-by-step explanation:

To determine the annual percentage yield (APY) or effective interest rate for $700 invested at 3.55% over 10 years compounded daily, we can use the formula:

APY = (1 + (annual interest rate / number of compounding periods))^(number of compounding periods) - 1

Given that the annual interest rate is 3.55% and the number of compounding periods is 365 (since the interest is compounded daily), we can substitute these values into the formula to calculate the APY:

APY = (1 + (0.0355 / 365))^365 - 1

Simplifying this expression gives us:

APY ≈ 0.035816 - 1 = 0.035816 (rounded to the nearest hundredth of a percent)