Solve the problem.
-Determine the effective annual yield for $1 invested for 1 year at 3.5% compounded semiannually.
A) 3.53%
B) 3.55%
C) 3.5.00%
D) 3.56%

Question

Quizplus · Accepted Answer

The effective annual yield (EAY) can be calculated using the formula for compound interest: $EAY = (1 + \frac{r}{n})^n - 1$, where $r$ is the annual interest rate (in decimal form) and $n$ is the number of compounding periods per year. For a 3.5% interest rate compounded semiannually, $r = 0.035$ and $n = 2$. Thus, $EAY = (1 + \frac{0.035}{2})^2 - 1 = (1.0175)^2 - 1 = 1.03530625 - 1 = 0.03530625$, or 3.53% when converted to a percentage.

Solve the Problem. -Determine the Effective Annual Yield for $1 Invested for 1