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

The fact that the interest is compounded quarterly is what allowed Therese to earn $103.81 in interest at the end of 12 months, which in turn affected her APY. The APR is still 10%, but the compounding frequency affects the actual amount of interest earned. The Truth in Savings Act is a law that requires financial institutions to disclose certain information to consumers, such as interest rates, fees, and terms.

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