Justin deposits $8,000 in a one-year CD at 3.1% interest, compounded daily. What is Justin's annual percentage yield (APY) to the nearest hundredth of a percent? (Hint: Find the interest using the compounding formula. Then use the simple interest formula to find the rate, as if the interest you found at first were simple interest.)

Question

anonymous · Answer

What is the formula?

wolf1728 · Answer

The formula for daily interest is
Daily Interest = [(1+rate/365)^365]-1
And the rate would be entered as .031
Daily Interest = (1.031/365)^365
Daily Interest = 1.03148414607725-1
Daily Interest = .03148414607725
Daily Interest = 3.148414607725%