Suppose that $4,000 is invested in a 6-month CD with an APY of 1.6
What is the corresponding APR?
(1+ .016/2)² - 1=0.016064=1.6064%
☺☺☺☺
To find the corresponding Annual Percentage Rate (APR) from the given Annual Percentage Yield (APY), we can use the following formula:
APR = (1 + APY/n)^n - 1
Where:
APY: Annual Percentage Yield
APR: Annual Percentage Rate
n: Number of compounding periods in a year
In this case, we need to find the APR for a 6-month CD with an APY of 1.6.
First, let's determine the number of compounding periods in a year. Since the CD has a 6-month term, there are two compounding periods in a year (since there are 12 months in a year and the CD compounds every 6 months).
n = 2
Next, substitute the given values into the formula:
APR = (1 + 0.016/2)^2 - 1
Simplifying this expression:
APR = (1 + 0.008)^2 - 1
APR = (1.008)^2 - 1
APR = 1.016064 - 1
APR = 0.016064
Therefore, the corresponding APR for a 6-month CD with an APY of 1.6 is approximately 0.0161 or 1.61%.