## starrhunter Group Title help please? Part 1: Explain which companies would advertise APY over APR and describe how this would help them attract customers. Part 2: Create a unique APR (state how often the rate is compounded) and calculate the corresponding APY. Use a comparison of the two rates to verify your answer to part 1. one year ago one year ago

1. amistre64 Group Title

2. amistre64 Group Title

APR of \$1, compounded is:$(1+\frac rn)^n$ APY is the rate it would have been if it had been stated at a compounding of 1 year:$(1+k)$where k is the APY $1+k=(1+\frac rn)^n$ $k=(1+\frac rn)^n-1$

3. starrhunter Group Title

Yes it is a bit vague isn't it? Would this be the answer to my question or a formula to plug my own numbers into?

4. amistre64 Group Title

this is a general formula to aid you along the way let r be the rate that is compounded, let n be the number of times a year it gets assessed, and then k (or the APY) is just a function r and n as stated

5. amistre64 Group Title

since the APR and the APY give the same "values" at the end of the year, the strategy lies in how people relate the value of a rate to their investments

6. starrhunter Group Title

I am supposed to create my own scenaario here. But I can't come up with a rational one to really protray the relationship between apr and apy.

7. amistre64 Group Title

usually, a higher numerical value attracts more investors on a psychological level

8. amistre64 Group Title

think of a rate ... think of how many times a year you want to assess that rate ...

9. starrhunter Group Title

okay so. 15.5% compounded monthly

10. amistre64 Group Title

then r = 15.5, n=12 and k = (1+.0155/12)^12 - 1

11. amistre64 Group Title

got my decie in the wrong spot :) 0.155/12 that is

12. starrhunter Group Title

.0129

13. amistre64 Group Title

APR = 15.5 % APY = 16.6449 % according to the workings of my patent pending formulas

14. starrhunter Group Title

Ah okay, this seems to make it more concrete. thank you :)

15. amistre64 Group Title

youre welcome; and just to fix a typo ... APY = 16.6499 % these old eyes aint what they used ta be

16. starrhunter Group Title

Ahaha, I was checking that on my calculator and I noticed that too, no worries. It happens to the best of us!