Federal Savings Bank is offering a 6-month CD (certificate of deposit) with an annual percentage rate of 6.3% compounded continuously. What is the equivalent annual percentage rate compounded annually or APY (annual percentage yield) on the CD? Give your answer as a percentage rounded to the nearest hundredth of a percent.

Question

Quizplus · Accepted Answer

The formula for continuous compounding is A = Pe^(rt). To find the APY, we use e^(0.063) - 1, which gives approximately 0.0650 or 6.50%.

Federal Savings Bank Is Offering a 6-Month CD (Certificate of Deposit)