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anonymous

  • 5 years ago

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?

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  1. anonymous
    • 5 years ago
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    quarterly =1/4 monthly =12

  2. anonymous
    • 5 years ago
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    A=P(1+r/n)^(n*t)

  3. dumbcow
    • 5 years ago
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    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%

  4. anonymous
    • 5 years ago
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    does A=3.08, how do you find y

  5. dumbcow
    • 5 years ago
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    i think y or yield is A as we've defined it A should be really close to 1

  6. anonymous
    • 5 years ago
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    I use the formula A=1(1+.065/4) (4*1)

  7. dumbcow
    • 5 years ago
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    oh not times 4 , raised to the 4th power

  8. dumbcow
    • 5 years ago
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    ^ means exponent

  9. anonymous
    • 5 years ago
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    I got .0050252592 for A

  10. dumbcow
    • 5 years ago
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    how did you get that? .065/4 =.01625 add 1 = 1.01625 raise to 4th power = 1.0666

  11. anonymous
    • 5 years ago
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    so A =1.0666 APY=.0666

  12. dumbcow
    • 5 years ago
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    times 100%

  13. anonymous
    • 5 years ago
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    i did the answer didnt change

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