Thinking Mathematically (6th Edition)

Published by Pearson
ISBN 10: 0321867327
ISBN 13: 978-0-32186-732-2

Chapter 8 - Personal Finance - 8.4 Compound Interest - Exercise Set 8.4 - Page 522: 61

Answer

The effective annual yield is the rate of simple interest which would earn the same amount of interest as the specified rate of compound interest.

Work Step by Step

The effective annual yield is the rate of simple interest which would earn the same amount of interest as the specified rate of compound interest. Calculating the effective annual yield can help us compare different rates of compound interest and different compounding periods to see which is a better investment.
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