Justin wishes to invest $7000 in a 3-year CD with an interest rate of 6.2% each year and compounded daily. What is the annual percentage yield for Justin's CD (rounded to the nearest hundredth)?
A) 6.40%
B) 6.20%
C) 20.44%
D) 1.06%
E) 0.02%

Question

Quizplus · Accepted Answer

To find the annual percentage yield (APY), we need to use the formula: 
APY = (1+(annual interest rate/365))^365 - 1

Plugging in the values, we get: 
APY = (1+(0.062/365))^365 - 1
APY = 0.063999
APY = 6.40%

Therefore, Justin's CD has an annual percentage yield of 6.40%, which is the closest to choice A.

Justin Wishes to Invest $7000 in a 3-Year CD with an Interest