An account has a rate of 2.7% find the effective annual yield if the interest is compounded monthly
To find the effective annual yield when interest is compounded monthly, we can use the formula:
Effective Annual Yield = (1 + (r/n))^n - 1
Where:
r = annual interest rate (in decimal form)
n = number of compounding periods per year
In this case, r = 0.027 (since the annual interest rate is 2.7% or 0.027) and n = 12 (since interest is compounded monthly).
Plugging in the values:
Effective Annual Yield = (1 + (0.027/12))^12 - 1
Effective Annual Yield = (1 + 0.00225)^12 - 1
Effective Annual Yield = (1.00225)^12 - 1
Effective Annual Yield ≈ 0.027440
Therefore, the effective annual yield of an account with a 2.7% interest rate compounded monthly is approximately 2.744%.