Question

A three-year CD can be purchased at a bank for $3000 with an APR of 5.53% that is compounded quarterly. So that you can compare this opportunity to a CD available at some other bank, calculate the APY. (Round your answer to the nearest hundredth of a percent.)

Answer 1

Answer: 5.65%

Step-by-step explanation:

Based on the information given, the annual percentage yield(APY) will be calculated as:

APY = (1+APR/Compounding periods)^Compounding periods - 1

= (1+5.53%/4)⁴ - 1

= (1 + 0.0553/4)⁴ - 1

= (1 + 0.013825)⁴ - 1

= 1.013825⁴ - 1

= 1.056457 - 1

= 5.65%

Therefore, the APR is 5.65%