Math Personal Finance

Assume an 18-month CD purchased for $7000 pays an APR of 5% compounded monthly. What is the APY?
APY=____%

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asked by Alexis
  1. P=Po(1+r)^n. Calculate int. for 1 year.

    r = (5%/12)/100% = 0.00417 = Monthly %
    rate expressed as a decimal.

    n = 12comp./yr. * 1yr. = 12 Compounding
    periods.

    P = 7000(1.00417)^12 = $7358.13

    I = P-Po = 7358.13 - 7000 = $358.13

    APY = (I/Po)*100% = (358.13/7000)*100% = 5.116%

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    posted by Henry

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