Narrative 11-1
Solve the following problems using either Tables 11-1 or 11-2 from your text. When necessary, create new table factors. (Round new table factors to five decimal places, round dollars to the nearest cent and percents to the nearest hundredth of a percent)
-Refer to Narrative in your text 11-1. Calculate the annual percentage yield on an investment of $7,000 at 8% interest, compounded quarterly, for one year. (Round the annual percentage yield to the nearest hundredth percent)
A) 24.73%
B) 8.00%
C) 7.75%
D) 8.24%

Question

Quizplus · Accepted Answer

The annual percentage yield (APY) can be calculated using the formula for compound interest, which takes into account the effect of compounding. Given an interest rate of 8% compounded quarterly, the APY is higher than the nominal rate of 8% due to the compounding effect. The correct calculation leads to an APY of approximately 8.24%, which accounts for the interest being compounded quarterly over the year.

Narrative 11-1 Solve the Following Problems Using Either Tables 11-1 or 11-2