Question

Gerd is considering an account that earns 6% interest per annum compounded monthly. What is the annual percentage yield (APY)? Give your answer as a percent rounded to the nearest tenth (e.g. 5.1%). Do not include the percentage sign (%) in the answer box below.

Answer 1

Data

Interest = 6%

Annual percentage yield = ?

APY = (1 + r/n)^n -1 12 is because a year has 12 months

6% = 0.06

APY = (1 + 0.06/12) ^12 - 1

APY = (1 + 0.005)^12 - 1

APY = (1.005)^12 - 1

APY = 1.062 - 1

APY = 0.062 or 6.2%