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Math Interest and Compounding Question

Mathematics
Tutor: None Selected Time limit: 1 Day

What is the annual nominal rate compounded daily for a bond that has an annual yield of 5.4%?

Mar 26th, 2015

To calculate APY for a given nominal interest rate, you need to know the nominal rate r as a decimal, and the number of compounding periods per year, N. The general formula is APY = (1 + r/N)^N.

When the interest is compounded daily, N = 365, thus APYDAILY = (1 + r/365)365 - 1.

An investment which states 5.400% nominal rate and compounding 365 times per year results in an effective rate of 5.548%.

Please reference:

https://www.calcxml.com/calculators/annual-yield?skn=#results


Mar 26th, 2015

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