Blake Hamilton has money in a savings account that earns an annual interest rate of 2%, compounded monthly. What is the APY (in percent) on Blake's account? (Round your answer the nearest hundredth of a percent.)
The formula for calculating APY is:
APY = (1 + r/n)^n - 1
Where:
r = annual interest rate = 2% = 0.02
n = number of times the interest is compounded per year = 12 (monthly)
Plug in the values:
APY = (1 + 0.02/12)^12 - 1
APY = (1 + 0.00166667)^12 - 1
APY = (1.00166667)^12 - 1
APY = 1.02019 - 1
APY ≈ 0.02019
Therefore, the APY on Blake's account is approximately 2.02%.