Question

Find the annual percentage yield of a saving account that pays 2.75% compounded quarterly

Answer 1

The annual percentage yield is of 2.78%.

Explanation:

Annual percentage yield of an account:

The annual percentage yield of an account compounded n times during the year with a decimal interest rate of r is given by:

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

Pays 2.75% compounded quarterly

This means that
`r = 0.0275, n = 4`. So

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

`Y = (1+(0.0275)/(4))^4 - 1`

`Y = 0.0278`

0.0278 = 2.78%

The annual percentage yield is of 2.78%.