Find the APY (in percent)

Question

A bank offers a CD at an annual interest rate of 7% compounded monthly. Find the APY (in percent). Round to the nearest hundredth of a percent.

%

Answer 1

A=P(1+r/n)^nt is the general formula for compound interest

A/P =(1+.07/12)^12t

let t=1 year, P=Principle = $100, with 7%=.07=r, 12=n= compounding periods per year

A/P= (1.0058333...)^12=1.072290038

A=$107.23 = ending Amount

,072290 = 7.23% annual rate of interest equivalent to 7% compounded monthly