Final answer:
The Annual Percentage Yield (APY) for an annual interest rate of 8% that is compounded monthly is calculated using the formula APY = ((1 + (r/n))^(n*t) - 1) × 100%. Substituting the values into the formula yields an APY of 8.30%.
Step-by-step explanation:
The question asks how to find the Annual Percentage Yield (APY) for an annual interest rate of 8% that is compounded monthly. To calculate the APY, which reflects the real rate of return accounting for compound interest, use the formula:
APY = ((1 + (r/n))^(n*t) - 1) × 100%
Where r is the annual interest rate (as a decimal), n is the number of times interest is compounded per year, and t is the number of years. In this case, r = 0.08, n = 12, and t = 1.
Plugging in the values:
APY = ((1 + (0.08/12))^(12*1) - 1) × 100%
APY = ((1 + 0.00666667)^12 - 1) × 100%
APY = (1.00666667^12 - 1) × 100%
APY = (1.08301392 - 1) × 100%
APY = 0.08301392 × 100%
APY = 8.30%
Therefore, the APY for an 8% interest rate compounded monthly is 8.30%.