Question

Duncan deposited $12,500 into a savings account, and he didn't make any deposits or withdrawals for a year. After interest was paid for the year, Duncan's new balance was $13,137.50. What was the APY of the savings account? A. 4.9% B. 4.7% C. 5.1% D. 4.5%

Answer 1

To calculate the APY of Duncan's savings account, the interest earned of $637.50 is divided by the initial deposit of $12,500 and then multiplied by 100, resulting in an APY of 5.1%, which corresponds to option C.

Step-by-step explanation:

The subject of this question is related to the concept of computing the Annual Percentage Yield (APY) on a savings account in mathematics.

To find the APY that Duncan's savings account earned over the year, we perform the following calculation:

Step 1: Determine the total interest earned by subtracting the initial deposit from the new balance after a year.

New Balance = $13,137.50
Initial Deposit = $12,500
Interest Earned = New Balance - Initial Deposit
Interest Earned = $13,137.50 - $12,500 = $637.50

Step 2: Calculate the APY using the interest earned and the initial deposit.

APY = (Interest Earned / Initial Deposit) × 100
APY = ($637.50 / $12,500) × 100
APY = 5.1%

Therefore, the answer is C. 5.1%.