Can you please help me I've tried over 30 times on this problem please show me the formula that I need to come up with the answer...
Assume and 18 months Ed purchased for 7000 days and APR of 5% compounded monthly. What is the APY? They want me to round the answer to two decimal places
7000 days? 18 months? what are you talking about?
anyway
.05/12 = .004167
so every month multiply by 1.004167
so in twelve months
v = Vi (1.004167)^12
v = Vi * 1.0511
or
5.11 percent annual interst
That answer was wrong...so I reposted the new question and made sure I typed it right which was my fault.The new problem is now at 7%.
They want the APY %
To find the Annual Percentage Yield (APY), we need to first calculate the future value of the investment using the formula for compound interest. Here's how you can do it:
Step 1: Convert the APR to a monthly interest rate.
Since the APR is given as 5%, we need to divide it by the number of compounding periods in a year. In this case, since it compounds monthly, we divide 5% by 12 to get the monthly interest rate: 5% / 12 = 0.4167%.
Step 2: Convert the term to the number of months.
The investment term is given in days, so we need to convert it to months. Since there are approximately 30.44 days in a month, we divide the number of days (7000) by 30.44 to get the equivalent number of months: 7000 / 30.44 ≈ 229.57 months.
Step 3: Apply the compound interest formula.
The compound interest formula is: Future Value = Principal × (1 + Rate/100)^Time.
In this case, the Principal is 18 months, the Rate is 0.4167% (monthly interest rate), and the Time is 229.57 months.
Future Value = 18 × (1 + 0.4167/100)^229.57
Step 4: Calculate the APY.
To calculate the APY, use the formula: APY = (Future Value / Principal - 1) * 100.
APY = [(18 × (1 + 0.4167/100)^229.57) / 18 - 1] * 100
After evaluating this expression using a calculator or spreadsheet, round the answer to two decimal places as requested.
Note: The formula assumes that the interest earned is reinvested in the account.