Question
The annual percentage yield (APY) of an investment account is a representation of the actual interest rate earned on a compounding account. It is based on a compounding period of one year. Show that the APY of an account that compounds monthly can be found with the formula $\mathrm{APY}=\left(1+\frac{r}{12}\right)^{12}-1$
Step 1
Step 1: The formula for the annual yield of an investment account that compounds interest is given by $\mathrm{APY}=\left(1+\frac{r}{n}\right)^{n}-1$ where $r$ is the interest rate and $n$ is the number of times the interest is compounded per year. Show more…
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