A passbook savings account has a rate of $7 \%$. Find the effective annual yield, rounded to the nearest tenth of a percent, if the interest is compounded monthly.
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The effective annual yield is $\square \%$.
(Round to the nearest tenth as needed.)
Answer
Final Answer: The effective annual yield is \(\boxed{7.2 \%}\).
Step 1 ：Translate the given annual interest rate of 7% into decimal form, which gives us 0.07.
Step 2 ：Since the interest is compounded monthly, we have 12 compounding periods in a year.
Step 3 ：We are looking for the effective annual yield, so we set the number of years to 1.
Step 4 ：Substitute these values into the formula for the effective annual yield: \(EAY = (1 + r/n)^{nt} - 1\), where r = 0.07, n = 12, and t = 1.
Step 5 ：Calculate the effective annual yield to get 7.2%.
Step 6 ：Final Answer: The effective annual yield is \(\boxed{7.2 \%}\).
