If the APR of a saving account is 4.8% and interest is compounded monthly what is the approximately APY of the account?

Question

asked Dec 1, 2018 162k views

2 Answers

Warren Strange · Answer 1 · 2018-12-07T17:59:28+0000

APY = (1 + i/n)^n - 1

where i is the interest rate (4.8%) written as 0.048

n is the number of periods it is paid (12)

So we get (1 + 0.048/12)^12 - 1

= (1 + 0.004)^12 -1

= (1.004^12) - 1

= 1.04907 - 1

= 0.04907

So the answer is B. 4.91%