We have been given that the APR of Vinny's savings account is 3.5%, but interest is compounded only once a year. Wee are asked to find the Annual percentage yield of Vinny's savings account.
We will APY formula to solve our given problem.
[tex]APY=(1+\frac{r}{n})^n-1[/tex], where,
r = Annual percentage rate in decimal form,
n = Number of times interest is compounded per year.
[tex]3.5\%=\frac{3.5}{100}=0.035[/tex]
Since interest is compounded per year, so [tex]n=1[/tex].
[tex]APY=(1+\frac{0.035}{1})^1-1[/tex]
[tex]APY=(1+0.035)-1[/tex]
[tex]APY=(1.035)-1[/tex]
[tex]APY=0.035[/tex]
Upon converting 0.035 to percent, we will get [tex]3.5%[/tex]%.
Therefore, APY of Vinny's savings account is 3.5%.
