Question

Find the annual percentage yield (APY) in the following situation,

A bank offers an APR of 3.88% compounded monthly.
The annual percentage yield is %.
(Do not round until the final answer. Then round to two decimal places as needed.)
What’s the answer?

Answer 1

3.95%

Explanation:

An interest-bearing account paying a stated nominal or annual interest rate of 3.880% compounded monthly, would translate to an Annual Percentage Yield (APY) or Effective Annual Rate (EAR) of 3.95%. This means that $100.00 will grow to $103.95 ($103.95 rounded) after one year.