anonymous
  • anonymous
1. Imagine a local bank representative is assisting you with establishing an account. The account you two are discussing has an APR of 6.5%. Determine the APY with quarterly compounding and with monthly compounding. How does changing the compounding period affect the annual yield?
Mathematics
chestercat
  • chestercat
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anonymous
  • anonymous
quarterly =1/4 monthly =12
anonymous
  • anonymous
A=P(1+r/n)^(n*t)
dumbcow
  • dumbcow
use that formula above assume we are depositing 1 for 1 year P=1 t=1 r=.065 n=4 or 12 find A in both cases APY = (A-1)/1 * 100%

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anonymous
  • anonymous
does A=3.08, how do you find y
dumbcow
  • dumbcow
i think y or yield is A as we've defined it A should be really close to 1
anonymous
  • anonymous
I use the formula A=1(1+.065/4) (4*1)
dumbcow
  • dumbcow
oh not times 4 , raised to the 4th power
dumbcow
  • dumbcow
^ means exponent
anonymous
  • anonymous
I got .0050252592 for A
dumbcow
  • dumbcow
how did you get that? .065/4 =.01625 add 1 = 1.01625 raise to 4th power = 1.0666
anonymous
  • anonymous
so A =1.0666 APY=.0666
dumbcow
  • dumbcow
times 100%
anonymous
  • anonymous
i did the answer didnt change

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