Question

Calculate the APY (Annual Percentage Yield) given a Deposit of $50, a market rate of 6%, compounded quarterly for 3 years.

Answer 1

ANNUAL PERCENTAGE YIELD

Annual percentage yield is the real rate of return earned taking into account the compounding effect . Compounding interest is the interest amount which is earned in that particular year will be added back to the principal amount for the next year interest calculation.

FORMULA :

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

P = Principal amount = 50$

r = rate of interest = 6%

n = compounding period = Quarterly = 4

t = number of years = 3

A = 50$ * ( 1+ 0.06/4 )^4*3

A = 50$ * (1.1956)¹²

A = 59.78$

ANNUAL PERCENTAGE YIELD FOR 3YEARS = 59.78$ COMPOUNDED QUARTERLY