SOLUTION: Find the annual percentage yield for an investment that earns 7% per year, compounded monthly. (Round your answer to two decimal places.)

Question 1201178: Find the annual percentage yield for an investment that earns 7% per year, compounded monthly. (Round your answer to two decimal places.)
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
7% per year, compounded monthly, = 7/12 = .583333.....% per month.
growth factor = that divided by 100 + 1 = 1.0058333333... per month.
that's the same as (1 + .07/12) growth factor per month.
to find the effective annual growth factor, raise that to the 125h power.
the effective interest rate per year is that minus 1.
multiply that by 100 to get the percent.
you will get:
(1 + .07/12) ^ 12 = 1.072290081.
that's the effective growth factor per year.
subtract 1 from that to get .072290081.
that's the effective growth rate per year.
multiply that by 100 to get 7.2290081%.
that's the effective percent growth rate per year.

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