Question

What is the APY on an account with an APR of 4.39% that is compounded daily? What does this mean?

Answer 1

The formula to find the APY is

`APY=(1+(r)/(n))^n-1`

Being r the interest rate and n the number of times the interest is compounded per year

In our case

r=0.039

n=365

Replacing

`\begin{gathered} APY=(1+(0.0439)/(365))^(365)-1 \\ \\ APY=0.04875 \\ \\ APY=4.88\% \end{gathered}`

To know what this means we need the APY definition

APY stands for annual percentage yield, otherwise called effective annual rate (EAR). This measurement is used to estimate the potential gain from an investment or the final balance in a deposit account.

Answer: So we going to have a potential gain of 4.88%.