An investment is made in an account that pays 9.25%, compounded daily. What is the effective yield for this investment? Round your answer to two decimal places.
A)9.69%
B)9.46%
C)9.65%
D)9.58%
E)9.25%

Question

Quizplus · Accepted Answer

The effective yield, also known as the effective annual rate (EAR), can be calculated using the formula: $EAR = (1 + \frac{r}{n})^n - 1$, where $r$ is the annual interest rate (expressed as a decimal), and $n$ is the number of compounding periods per year. For daily compounding, $n = 365$. Plugging in the given values: $EAR = (1 + \frac{0.0925}{365})^{365} - 1$, which approximately equals 0.0969 or 9.69% when rounded to two decimal places.

An Investment Is Made in an Account That Pays 9