A bank pays interest at the nominal rate of 3.8% per year. What is the effective annual yield if compounding is:
annual?
monthly?
continuously?

Question

A bank pays interest at the nominal rate of 3.8% per year. What is the effective annual yield if compounding is:
 annual?
monthly? 
continuously?

anonymous · Answer

monthly

anonymous · Answer

no, I'm suppose to say what the yield is for each one. whats the yield if its compounded annualy, monthly and continously

anonymous · Answer

its  monthly

ganeshie8 · Answer

Annual yield =      $\large \left( 1+ \dfrac{r}{n} \right)^n - 1$

ganeshie8 · Answer

$r =  0.038$ fixed quantity  :


 $\large \left( 1+ \dfrac{0.038}{n} \right)^n - 1$

ganeshie8 · Answer

change $n$ based on compounding and evaluate

ganeshie8 · Answer

$n$  is the compounding interval,
for annual compounding,  $n = 1$

anonymous · Answer

how would you do continuous?

ganeshie8 · Answer

for continuous use the method we have used in ur previous problem

anonymous · Answer

i have 3 min to submit these can you solve them out? I keep getting them wrong

ganeshie8 · Answer

yield =  $\large   e^{r} - 1$

ganeshie8 · Answer

$\large e^{0.038}-1$

ganeshie8 · Answer

feed it to wolfram : http://www.wolframalpha.com/input/?i=+e%5E%7B0.038%7D-1

ganeshie8 · Answer

Annual is simply `0.038` monthly : http://www.wolframalpha.com/input/?i=%281%2B0.038%2F12%29%5E%2812%29-1 continuous : http://www.wolframalpha.com/input/?i=+e%5E%7B0.038%7D-1

ganeshie8 · Answer

maybe they want answers in percentages... so multiply them by 100

anonymous · Answer

your answers were right, unfortunately they didn't make it in on time. but I got everything else right. Thanks for trying though. I hate how I never have enough time to do these :/

ganeshie8 · Answer

okk