Question

Find the annual percentage yield (APY) in the following situation.
A bank offers an APR of 6.7% compounded daily.
The annual percentage yield is %.
(Do not round until the final answer. Then round to two decimal places as needed.

Answer 1

Answer:

APY = 6.93%

Step-by-step explanation:

To calculate for the APY, use the formula:

$APY = (1 + \frac{r}{m})^{m} -1$

where r = rate = 6.7% or 0.067

m = number of compounding periods = 365 (daily compounding)

Plug in the given values into the formula:

$APY = (1 + \frac{r}{m})^{m} -1$

$APY = (1 + \frac{0.067}{365})^{365} -1$

$APY = (1 + 0.00018356)^{365} -1$

$APY = (1.00018356)^{365} -1$

$APY = 1.0692889 - 1$

APY = 0.0692889 = 0.0693 or 6.93%

Therefore, the annual percentage yield is 6.93%.