Question 1 2 pts The term annual percentage yield (APY) is the same as: An annual nominal rate An annual effective rate Annual Percentage Rate Annual Simple Rate

Economics Aug 06, 2020

Expert Solution

Option B

Annual percentage yield is the yield or return generated in a year which depends upon the frequency of compounding.
Similarly, annual effective rate is the resultant rate after nominal rate of interest has been subjected to the compounding effect.

APY or Annual Effective Rate = (1+(Nominal Rate / Compounding Frequency)) ^ (Duration * Compounding Frequency)

If the compounding is monthly then

APY = (1+(Nominal Rate / 12)) ^ (1 * 12)

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