I have an independent retirement account...

Question

I have an independent retirement account with first community credit union of beloit wisconsin which currently pay dividends at .75% per year, compounded monthly for accouts with balances up to 2000. what is the apy for such a rate?

Answer 1

I think APY is the same as effective interest rate:

 

i_e = APY = (1 + i/m)^m - 1; where i is the nominal rate and m is the number of compounding periods. m = 12 in this case because it is compounded monthly.

 

= (1 + .0075/12)¹² - 1 = 0.7526%