Annual Percentage (APY): the actual percentage by which a balance increases in one year. Example 5.3.6: Annual Percentage Yield (APY) Find the Annual Percentage Yield for an investment account with a. 7.7% interest compounded monthly b. 7.7% interest compounded daily c. 7.7% interest compounded continuously. To find APY, it is easiest to examine an investment of $1 for one year. = $1, = 0.077, = 1, = 12 P r t n The percentage the $1 was increased was 7.9776%. The APY is 7.9776%. = $1, = 0.077, = 1, = 365 P r t n The percentage the $1 was increased was 8.0033%. The APY is 8.0033%. = $1, = 0.077, = 1 P r t The percentage the $1 was increased was 8.0042%. The APY is 8.0042%. Section 5.4: Savings Plans Sometimes it makes better financial sense to put small amounts of money away over time to purchase a large item instead of taking out a loan with a high interest rate. When looking at depositing money into a savings account on a periodic basis we need to use the savings plan formula.
Annual Percentage (APY): the actual percentage by which a balance increases in one year. Example 5.3.6: Annual Percentage Yield (APY) Find the Annual Percentage Yield for an investment account with a. 7.7% interest compounded monthly b. 7.7% interest compounded daily c. 7.7% interest compounded continuously. To find APY, it is easiest to examine an investment of $1 for one year. P = $1, r = 0.077, t = 1, n = 12 The percentage the $1 was increased was 7.9776%. The APY is 7.9776%. P = $1, r = 0.077, t = 1, n = 365 The percentage the $1 was increased was 8.0033%. The APY is 8.0033%. P = $1, r = 0.077, t = 1 The percentage the $1 was increased was 8.0042%. The APY is 8.0042%. Section 5.4: Savings Plans Sometimes it makes better financial sense to put small amounts of money away over time to purchase a large item instead of taking out a loan with a high interest rate. When looking at depositing money into a savings account on a periodic basis we need to use the savings plan formula.