Question

suppose a savings and loan pays a nominal rate of 2.3% on savings deposits. find the effective annual yield if interest is compounded daily. assume that the year is not a leap year.(round to the nearest thousandth as needed)

Answer 1

To find out how much is the effective annual yield we use the formula:

$(1+\frac{r}{n})^{nt}$

In this case r=0.023, n=365. Then:

$(1+\frac{0.023}{365})^{365t}=1.0001^{365t}$