Earl Miller deposited $25,000 at Y Bank at an interest rate of 12% compounded quarterly. (Use the tables in the handbook.) The effective rate (APY) is:

Question

Quizplus · Accepted Answer

The formula to calculate Effective Annual Rate (EAR) is:
EAR = (1 + (nominal rate / n))^n - 1
where n is the number of times the interest is compounded per year.

In this case, EAR = (1 + (0.12 / 4))^4 - 1 = 0.1255 or 12.55%

Therefore, the answer is B: 12.55%.

Earl Miller Deposited $25,000 at Y Bank at an Interest