Create a unique APR(state how often the rate is compounded) and calculate the corresponding APY. Use a comparison of the two rates to verify your answer.
+37084 Pick one
APR = 12%
compounded quarterly (every three months) Periodic interest = 12/4 = 3% = .03 = i
APY = (1+i)^n where n=periods in a year (4)
APY = 1- (1.03)^4 = .1255 = 12.55 Percent
Which shows that compounding will effectively raise the APR MORE frequent compounding will raise it even more!
OK, kiddo!.
Will use 10%.
APR PERIODS OF COMPOUNDING APY
10% 1 per year 10%
2 ,,,,,,,,,,,, 10.25%
4,,,,,,,,,,,,, 10.38%
6,,,,,,,,,,,,, 10.43%
12,,,,,,,,,,,, 10.47%
26,,,,,,,,,,, 10.50%
52,,,,,,,,,,, 10.51%
365,,,,,,,,, 10.52%
Continuously 10.52%
I HOPE YOU ARE HAPPY!!
+37084 Pick one
APR = 12%
compounded quarterly (every three months) Periodic interest = 12/4 = 3% = .03 = i
APY = (1+i)^n where n=periods in a year (4)
APY = 1- (1.03)^4 = .1255 = 12.55 Percent
Which shows that compounding will effectively raise the APR MORE frequent compounding will raise it even more!
