Question

The APR of Burt's savings account is 2.5%, but interest is compounded only

once a year. What is the APY of Burt's savings account?
O
A. 2.5%
O
B. 1%
O
C. Greater than 1% but less than 2.5%
O
D. Greater than 2.5%

Answer 1

A. 2.5%

Explanation:

Answer 2

Annual Percentage Yield (APY) of Burt's savings account is 2.5%

Explanation:

Annual percentage rate refers to the annual percentage return of the saving account held by Burt's. The interest rate is compounded annually. Hence, the interest is added annually to the account.

Annual Percentage yield refers to the real rate of return that is earned on the savings. This interest is accrued in compounding fashion. Higher the interest rate more is the amount returned.

Hence, the Annual Yield of the Burt's savings account is 2.5%