Question

suppose a savings and loan pays a nominal rate of 3.6% on savings deposits. find the effective annual yield if interest is compounded annually. (round to the nearest thousandth as needed)

Answer 1

The effective annual yield is 3.6%.

Step-by-step explanation:

To find the effective annual yield, we need to use the formula:

Effective Annual Yield = (1 + i/n)^n - 1

Where i is the nominal rate and n is the number of compounding periods per year.

In this case, the nominal rate is 3.6% and interest is compounded annually, so there is only 1 compounding period per year.

Using the formula, we have:

(1 + 3.6%/1)^1 - 1 = (1 + 0.036)^1 - 1 = 0.036

Therefore, the effective annual yield is 0.036 or 3.6%.

Answer 2

To find the effective annual yield, we will use the formula:

`\lbrack1\text{ +(}(i)/(n))\rbrack^n-\text{ 1}`

where i is the nominal interest rate

n is the number of time the interest is compounded annually

From the question, i = 3.6%= 0.036

n = 1

substitute the values into the formula;

`\lbrack1\text{ +}(0.036)/(1)\rbrack^1-\text{ 1}`

= [1 +0.036 ] - 1

= 0.036