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Annual Percentage Rate (APR) and Annual Percentage Yield (APY)

Annual Percentage Rate (APR) and Annual Percentage Yield (APY). The Annual Percentage Rate (APR) is the interest rate used by a bank when calculating the interest earned by a savings account. The APR is affected by the method of compounding. The highest APR

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Annual Percentage Rate (APR) and Annual Percentage Yield (APY)

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  1. Annual Percentage Rate(APR) andAnnual Percentage Yield(APY)

  2. The Annual Percentage Rate (APR) is the interest rate used by a bank when calculating the interest earned by a savings account. The APR is affected by the method of compounding. The highest APR does not necessarily lead to the highest yield. The Annual Percentage Yield (APY) is a technique to “level the playing field“. The APY calculates what the interest rate would be on a savings account if the number of times the interest was compounded in one year was one. Under these rules, the account with the greatest APY will give you the best return on your investment.

  3. To find the APY of an account: 1. Calculate “A” under the given conditions. 2.Use A, the original given values for P and t, and the regular compound interest formula with n = 1 to find r. This value of r will be the APY. It will normally be slightly higher than the original (APR) interest rate.

  4. Two different banks have savings accounts with the following conditions. If you deposit $100, how much will each account have in it in 3 years. Bank 1: 5%, compounded quarterly Bank 2: 4.98%, compounded continuously

  5. To four decimal places and written as a percent, calculate each account’s APY. Bank 1: Bank 2:

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