Question

Marit Brunsell deposited $65,000 at Bank of America at 8% interest compounded quarterly.

What is the effective rate (APY)? (Do not round intermediate calculations. Round your answer to the nearest hundredth percent.)

Answer 1

APY refers to annual percentage yield. It is calculated as:
APY=(1+Annual interest rate/Number of compounding periods in a year)^(Number of compounding periods in a year) - 1

Substituting the values, we get;
APY=(1+8%/4)^4 -1
=1.08243216-1
=0.08243216 or 8.24% (Rounded to two decimal places)