The stated interest rate on your account is 7.12%,interest paid semi-annually.Your effective rate of interest (APY)will be

Question

Quizplus · Accepted Answer

Since the interest is paid semi-annually, the compounding period is also semi-annually. Therefore, the effective rate of interest or APY can be calculated using the formula: 
APY = (1 + (interest rate/compounding periods))^compounding periods - 1

APY = (1 + (0.0712/2))^2 - 1
APY = 0.0731 or 7.31%

Therefore, the effective rate of interest (APY) is greater than the stated interest rate of 7.12%.

The Stated Interest Rate on Your Account Is 7