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7 November, 07:50

A bank offers an APR of 1.39% compounded monthly what is the annual percentage yield

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  1. 7 November, 08:06
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    The formula for APY (Annual Percentage Yield) is:

    (1+r/n) ^n - 1

    r=rate. 0.0139 in this case which we get by dividing 1.39% by a 100.

    n=number of times compounded. 12 in this cases (compounded monthly. there are 12 months in a year, and we are trying to find the * annual * percentage yield. Annual means 1 year=12 months).

    Let's plug in the numbers:

    (1+0.0139/12) ^12-1

    =0.01398889730

    Let's convert to percentage by multiplying the result by a 100 (or moving the period twice to the right):

    =0.01398889730*100

    =1.398889730%

    As a personal preference I will round to the hundredth place (you can round to whatever place you like):

    1.40%
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