Ms.Santoro is opening a one-year CD for 16,000. the interest is compounded daily. She is told by the bank representative that the annual percentage rate (APR) is 4.8. what is the annual percentage yield (APY) for this account?
+118723 Once again I am not 100% comfortable with the terminology BUT
I assume 4.8% is the nominal rate and you want the effective rate.
1+effective rate = (1+0.048/365)^365
effective rate = (1+0.048/365)^365 -1
$${\left({\mathtt{1}}{\mathtt{\,\small\textbf+\,}}{\frac{{\mathtt{0.048}}}{{\mathtt{365}}}}\right)}^{{\mathtt{365}}}{\mathtt{\,-\,}}{\mathtt{1}} = {\mathtt{0.049\: \!167\: \!344\: \!264\: \!922\: \!5}}$$
+118723 Once again I am not 100% comfortable with the terminology BUT
I assume 4.8% is the nominal rate and you want the effective rate.
1+effective rate = (1+0.048/365)^365
effective rate = (1+0.048/365)^365 -1
$${\left({\mathtt{1}}{\mathtt{\,\small\textbf+\,}}{\frac{{\mathtt{0.048}}}{{\mathtt{365}}}}\right)}^{{\mathtt{365}}}{\mathtt{\,-\,}}{\mathtt{1}} = {\mathtt{0.049\: \!167\: \!344\: \!264\: \!922\: \!5}}$$
