Answer:
For a principle amount of $1600 and rate 5.4%, the effective annual yield is 5.55% if interest is compounded annually.
Step-by-step explanation:
Concept: The annual percentage yield (APY) or the effective annual yield is the real rate of return earned on an investment, taking into account the effect of compounding interest.
The principle amount is $1600, rate is 5.4% and period is 365 days. The formula to find yield is [tex]Y = (1+\frac{r}{n} )^{n} -1[/tex]. All the values are to be inserted in the formula. Here n = 365 and r = 5.4%.
[tex]Y=(1+\frac{0.054}{365} )^{365} -1\\Y=(1.000148)^{365} -1\\Y=5.55%[/tex]
The annual yield is 5.55%.
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