Question

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?

Answer 1

quarterly =1/4
monthly =12

Answer 2

A=P(1+r/n)^(n*t)

Answer 3

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%

Answer 4

does A=3.08, how do you find y

Answer 5

i think y or yield is A as we've defined it
A should be really close to 1

Answer 6

I use the formula A=1(1+.065/4) (4*1)

Answer 7

oh not times 4 , raised to the 4th power

Answer 8

^ means exponent

Answer 9

I got .0050252592 for A

Answer 10

how did you get that?
.065/4 =.01625
add 1 = 1.01625
raise to 4th power = 1.0666

Answer 11

so A =1.0666
APY=.0666

Answer 12

times 100%

Answer 13

i did the answer didnt change