6. When previously earned interest is added to an investment and then allowed to earn more interest, we say that the interest is compounded. Compounding interest increases the effective interest rate of an investment compared to simple interest, where the interest earned is not added to the investment to earn additional interest. The annual percentage yield, or APY, gives the effective interest rate on an investment based on the number of times the interest is compounded in a year, n, and the interest rate, r, as a decimal. APY = | 1 +-)-1 Find the annual percentage yield if the interest rate is 4% and interest is compounded monthly. State the answer as a percent rounded to the nearest hundredth.

# 6. When previously earned interest is added to an investment and then allowed to earn more interest, we say that the interest is compounded. Compounding interest increases the effective interest rate of an investment compared to simple interest, where the interest earned is not added to the investment to earn additional interest. The annual percentage yield, or APY, gives the effective interest rate on an investment based on the number of times the interest is compounded in a year, n, and the interest rate, r, as a decimal. APY = | 1 +-)-1 Find the annual percentage yield if the interest rate is 4% and interest is compounded monthly. State the answer as a percent rounded to the nearest hundredth.

Algebra and Trigonometry (MindTap Course List)

4th Edition

ISBN:9781305071742

Author:James Stewart, Lothar Redlin, Saleem Watson

Publisher:James Stewart, Lothar Redlin, Saleem Watson

Chapter4: Exponential And Logarithmic Functions

Section4.CT: Chapter Test

Problem 11CT

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