Therese made an investment of $1,000 into an account that pays a 10% annual interest rate which is compounded quarterly.At the end of the 12-month period,Therese earned $103.81 in interest on her $1,000 investment.She calculates her annual percentage yield (APY)to be 10.38%.This is an example of how interest is
A)compounded.
B)the same as the annual percentage rate (APR).
C)effected by the annual percentage yield (APY).
D)part of the truth in savings act.

Question

Quizplus · Accepted Answer

Compounded interest is calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan. In this scenario, the interest earned on Therese's investment is a result of compounding quarterly, not simply a straightforward application of the annual interest rate.

Therese Made an Investment of $1,000 into an Account That