We have been given that the APR of Vinny's savings account is 3.5%, but interest is compounded only once a year. Wee are asked to find the Annual percentage yield of Vinny's savings account.
We will APY formula to solve our given problem.
\(APY=(1+\frac{r}{n})^n-1\), where,
r = Annual percentage rate in decimal form,
n = Number of times interest is compounded per year.
\(3.5\%=\frac{3.5}{100}=0.035\)
Since interest is compounded per year, so \(n=1\).
\(APY=(1+\frac{0.035}{1})^1-1\)
\(APY=(1+0.035)-1\)
\(APY=(1.035)-1\)
\(APY=0.035\)
Upon converting 0.035 to percent, we will get \(3.5%\)%.
Therefore, APY of Vinny's savings account is 3.5%.
