How would you determine the effective annual yield for $1 invested for 1 year at 3.5% compounded quarterly?
When the interest compounded quarterly, we will get interest 4 times in a year and interest percent will become 1/4 times.
Here, Investment (P) = $1, Year ( n) = 1 x 4 = 4 Rate of interest (r) = 3.5 x 1/4 .
We have to calculate the yield.
We know, Here A =
So, Yield = A - P