Question

Marit Brunsell deposited $80,000 at Bank of America at 12% interest compounded quarterly. What is the effective rate (APY)? (Do not round intermediate calculations. Round your answer to the nearest hundredth percent.)

Answer 1

12.55%

Step-by-step explanation:

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

Where;

r = 12% = 0.12

n = 4, As the rate is compounded quarterly so n will be 4 per year.

APY =
`(1 + (0.12)/(4) )^(4) -1`

APY =
`(1 + 0.03)^(4) -1`

APY =
`(1.03)^(4) -1`

APY = 1.12550881 - 1

APY = 0.12550881

or

APY = 12.55%