Chapter 11, Problem 18AT

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

Chapter
Section

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Solve the following word problems by using Table 11-1 or 11-2. When necessary, create new table factors. Round dollars to the nearest cent and percents to the nearest hundredth of a percent.What is the annual percentage yield of a $10,000 investment for 1 year at 6 % interest compounded monthly? To determine To calculate: The annual percentage yield of investment for principal$10,000 investment for 1 year at 6% interest compounded monthly.

Explanation

Given Information:

An investment for principal $10,000 investment for 1 year at 6% interest compounded monthly. Formula used: Compounding period can be defined as the duration or length of time from one interest payment to the next. If an investment made for 4 years at 6% compounded annually (once per year) then it would have four compounding period which can be calculated by formula given below: Compounding periods=Term of investments(years)×m Here, m is the period per year. The interest rate per period can be calculated by dividing the annual, or nominal, rate by the number of periods per year, Interest rate per period=Nominal ratePeriod per year Compound amount: The Compound amount can be calculated by the formula given below: Compoundamount(FV)=Tablefactor×Principal In Compound interest table 111, the table factor is the intersection of the rate-per-period column and the number-of-periods row is the future value of$1 at compound interest.

The compound interest can be calculated by the formula given below:

Compound interest=Compound amountPrincipal

Annual Percentage Yield:

It can be calculated by finding the total compound interest earned in 1 year and dividing by the principal.

AnnualPercentageYield(APY)=Totalcompoundinterestearnedin1yearPrincipal

Calculation:

Consider the principal \$10,000 investment for 1 year at 6% interest compounded monthly

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