A passbook savings account has a rate of
(1) Click the icon to view some finance formulas.
The effective annual yield is
(Round to the nearest tenth as needed.)
Final Answer: The effective annual yield is
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:
Step 5 :Calculate the effective annual yield to get 7.2%.
Step 6 :Final Answer: The effective annual yield is