What is the annual percentage yield (or effective annual rate) for a nominal rate of 12% compounded continuously? Round your answer to two decimal places.
A)16.18%
B)12.75%
C)11.53%
D)14.26%
E)18.70%

Question

What is the annual percentage yield (or effective annual rate) for a nominal rate of 12% compounded continuously? Round your answer to two decimal places. ​
A)16.18%
B)12.75%
C)11.53%
D)14.26%
E)18.70%

Quizplus · Accepted Answer

The annual percentage yield (APY) or effective annual rate for a nominal rate of 12% compounded continuously is calculated using the formula $APY = e^{r} - 1$, where $r$ is the nominal interest rate as a decimal. For a 12% rate, $r = 0.12$, so $APY = e^{0.12} - 1 \approx 0.1275$ or 12.75%.

What Is the Annual Percentage Yield (Or Effective Annual Rate)