Blake Hamilton has money in a savings account that earns an annual interest rate of 4%, compounded monthly. What is the APY (in percent) on Blake's account? (Round your answer the nearest hundredth of a percent.)
The formula to calculate the APY (Annual Percentage Yield) is:
APY = (1 + (r/n))^n - 1
Where:
r = annual interest rate = 4% = 0.04
n = number of times the interest is compounded per year = 12
APY = (1 + (0.04/12))^12 - 1
APY = (1 + 0.00333333333)^12 - 1
APY = (1.00333333333)^12 - 1
APY = 1.0421175 - 1
APY = 0.0421175
So, the APY on Blake's account is approximately 4.21%.
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I apologize for the mistake. Let me recalculate the APY:
APY = (1 + (0.04/12))^12 - 1
APY = (1 + 0.00333333333)^12 - 1
APY = (1.00333333333)^12 - 1
APY = 1.04380679 - 1
APY = 0.04380679
So, the APY on Blake's account is approximately 4.38%.