Question

What is the APY for money invested at each rate? (A) 14% compounded quarterly (B) 13% compounded continuously % (Round to three decimal places as needed.) (A) APY

Answer 1

(A)

Interest rate = 14% compounded quarterly

Calculate APY -

APY = [1 + (r/n)]ⁿ - 1

APY = [1 + (0.14/4)]⁴ - 1

APY = [1 + 0.035]⁴ - 1

APY = [1.035]⁴ - 1

APY = 1.1475 - 1 = 0.1475 or 14.75%

Thus,

The APY is 14.75%

(B)

Interest rate = 13% compounded continuously

Calculate APY -

APY = e^r - 1

APY = e^0.13 - 1

APY = 1.1388 - 1

APY = 0.1388

APY = 13.88%

Thus,

The APY is 13.88%.