The annual percentage yield is given by the following formula:
[tex]\text{APY}=(1+\frac{r}{n})^n-1[/tex]Where r is the stated annual interest rate (in decimal form) and n is the number of times compounded.
A) APY for money invested at an annual rate of 4.09% compounded monthly.
Thus, the annual interest rate in decimal form is:
[tex]r=\frac{4.09\%}{100\%}=0.0409[/tex]And as it is compounded monthly then n=12.
Replace these values and solve:
[tex]\begin{gathered} \text{APY}=(1+\frac{0.0409}{12})^{12}-1 \\ \text{APY}=(1+0.0034)^{12}-1 \\ \text{APY}=(1.0034)^{12}-1 \\ \text{APY}=1.0417-1 \\ \text{APY}=0.0417 \end{gathered}[/tex]The APY is 0.0417=4.17%.
B) 4.1% compounded quarterly:
The annual interest rate is:
[tex]r=\frac{4.1\%}{100\%}=0.041[/tex]As it is compounded quarterly then n=4.
Replace and solve:
[tex]\begin{gathered} \text{APY}=(1+\frac{0.041}{4})^4-1 \\ \text{APY}=(1+0.0103)^{12}-1 \\ \text{APY}=(1.0103)^{12}-1 \\ \text{APY}=1.1302-1 \\ \text{APY}=0.1302 \end{gathered}[/tex]The APY is 0.1302=13.02%
