What is the APY for an account with a nominal annual rate of 5% compounded quarterly?

Question

Question

Answer 1

Answer #1

APY is calculated using below formula:

APY = (1 + r/n )ⁿ – 1

Annual interest rate = r = 5% = 0.05

Number of compounding period = n =Quarterly = 4

APY = (1 + 0.05/4)⁴-1

= (1 + 0.0125)⁴-1

= (1.0125)⁴-1

= 1.0509453 – 1

= 0.0509453

= 5.095 % (Approx)

The APY is 5.095%

source: https://www.bankrate.com/glossary/a/apy-annual-percentage-yield/

answered by: Sam Patil

Answer 2

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