Question

QUESTION 3.1 POINT

An investment pays 25% interest compounded monthly. What percent, as a decimal, is the effective annual yied? Enter your
answer as a decimal rounded to four decimal places.

Answer 1

9514 1404 393

Answer:

0.2807

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

e = (1 +0.25/12)^12 -1 = 0.2807 . . . . . . about 28.07%