Question

suppose a savings and loan pays a nominal rate of 1.4% on savings deposits. find the effective annual yield if interest is compounded annually. (round to the nearest thousandth as needed)

Answer 1

Answer:

The effective annual yield is 7,044%

Explanation:

The effective annual yield is given by the formula:

$(i+\frac{i}{n})^n-1$

Where i is the nominal interest rate. i = 1.4% = 0.014

n is the number of time compounded annually. n = 1

Using these, we have

$\begin{gathered} (0.014+\frac{1}{0.014})^1-1 \\ \\ =70.44 \end{gathered}$