Question

An investment pays 9% interest compounded weekly. What percent, as a decimal, is the effective annual yield? Enter your answer as a decimal rounded to four decimal places.

Answer 1

If an investment pays an annual interest rate r compounded m times in a year, then the effective annual yield is calculated as:

$r_e=\left(1+\frac{r}{m}\right)^m-1$

An investment pays r = 9% = 0.09.

There are m = 48 business weeks in a year.

Calculating:

$r_e=\left(1+\frac{0.09}{48}\right)^{48}-1$

effective annual yield = 0.0941