Question

You deposit $2000 into an account that pays 6% compounded monthly. a. How much money will you have in the account after 1 year? $   b. What is the effective annual yield?   %

Answer 1

We have a deposit of $2000 into an account that pays 6% compounded monthly, after a year we will have:

`\begin{gathered} \text{account}_{\text{year}}=2000\cdot(1+(6)/(100))^(12) \\ \text{account}_{\text{year}}=4024.4 \end{gathered}`

The effective annual yield (EAY) will be:

`\text{EAY}=(account_(year))/(2000)-1=(4024.14)/(2000)-1=1.0122`

The EAY is 101.22%