Determine the annual percentage yield, or the effective interest rate, for $1200 invested at 6.63% over 8 years compounded daily. Round your answer to the nearest hundredth of a percent, if necessary.
To calculate the annual percentage yield, we can use the formula:
APY = (1 + (nominal rate / n))^n - 1
Where:
nominal rate = 6.63%
n = number of compounding periods per year = 365 (daily compounding)
APY = (1 + (0.0663 / 365))^365 - 1
APY = (1 + 0.0001810959)^365 - 1
APY = (1.0001810959)^365 - 1
APY = 1.071413 - 1
APY = 0.071413
So, the annual percentage yield for $1200 invested at 6.63% over 8 years compounded daily is 7.14%.