The effective yield is the annual rate i that will produce the same interest per year as the nominal rate compounded n times per year. For a rate that is compounded n times per year, the formula for effective yield is given as $i = \left( 1 + \frac { r } { n } \right) ^ { n } - 1$ . Find the effective yield for a nominal rate of 10%, compounded monthly. Round your answer to two decimal places.
A)1.05%
B)10.71%
C)11.10%
D)1.61%
E)10.47%

Question

Quizplus · Accepted Answer

The effective yield is calculated using the formula $i = \left( 1 + \frac {0.10} {12} \right) ^ {12} - 1$. This results in approximately 0.1047 or 10.47%.

The Effective Yield Is the Annual Rate I That Will i=(1+rn)n−1i = \left( 1 + \frac { r } { n } \right) ^ { n } - 1i=(1+nr​)n−1

The Effective Yield Is the Annual Rate I That Will $i = \left( 1 + \frac { r } { n } \right) ^ { n } - 1$