Question

a passbook savings account has a 7% . Find the annual yield

Answer 1

You haven't mentioned that intrest rate is compounded yearly/monthly.( Your bank may pay interest once in a year or your bank may calculate the pay interest per month)

• CASE-I COMPOUNDED YEARLY

If your bank pay interest once in a year or

compounded yearly.

APY = 7%

Means, you will earn $7 interest on every $100 deposit.

If you deposited $100 as principal amount in bank then after 1 year, you will have $107 in your bank account.

• CASE-II COMPOUNDED MONTHLY

If your bank pay interest every month ( 12 times in a year)

compounded monthly.



i.e. APY = 7.229%

Means, you will earn $7.229 interest after a year on every $100 deposited in your bank.

I hope it helps. Please feel free to revert back with further queries ( if any) in comments.