SOLUTION: Assume that an 18-month CD purchased for $11,000 pays an APR of 6% compounded monthly. What is the APY? (Round your answer to two decimal places.)

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Question 1169394: Assume that an 18-month CD purchased for $11,000 pays an APR of 6% compounded monthly. What is the APY? (Round your answer to two decimal places.)
Found 2 solutions by ikleyn, Boreal:
Answer by ikleyn(52781)   (Show Source): You can put this solution on YOUR website!
.


Under given conditions,


   APY =  = 0.0617 as a decimal,  or  6.17%  as a percentage.


It is the effective annual percentage rate, taking compounding in account.  

It is DIFFERENT from the nominal annual percentage, which is 6% in this case.



Answer by Boreal(15235)   (Show Source): You can put this solution on YOUR website!
compounded monthly is (1+(.06/12))^12-1
or 1.005^12-1=0.0617 or 6.17%.
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