Question

Bank B pays 5.9% annual percentage rate compound semiannually what is the effective annual yield round to the nearest hundredth

Answer 1

9514 1404 393

Answer:

5.99%

Explanation:

The relationship between the effective annual yield (e) and the nominal annual interest rate (r) compounded n times per year is ...

e = (1 +r/n)^n -1

For r = 5.9% and n = 2, the effective rate is ...

e = (1 +0.059/2)^2 -1 = 0.059870 ≈ 5.99%