Question

An investment pays 21% 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

9514 1404 393

Answer:

0.2332

Explanation:

The relationship between the effective annual yield (e) and the nominal annual interest rate (r) compounded n times per year is ...

e = (1 +r/n)^n -1

For weekly compounding, we have n=52, so ...

e = (1 +0.21/52)^52 -1 = 0.2332 . . . . . . . about 23.32%