you plan to open a savings account with $500 at 4% interest compounded quarterly. what is the annual percentage yield

Question

I need the percent 

Answer 1

First calculate the final balance after 1 year.

 

For compound interest, P(t) = P₀(1+r/n)^nt.  Since r = 4% or 0.04 and n = 4 and t = 1,

 

P(1) = 500(1 + 0.04/4)⁴⁽¹⁾=500(1.01)⁴=$520.30.

 

This means you earned $20.30 interest.

 

The annual percentage yield is simply the percentage you'd get if you acheived this result for simple interest for 1 year.

 

So 20.30/500 = 0.0406 or 4.06%