1. Annual Percentage Yield APY
Investments Lesson 12.2
Annual Percentage Yield
APY

2. Vocabulary
Annual Percentage Yield (APY)- Also called effective annual yield is the rate of return on your investment for a one-year period. The higher the APY, the better the investment.
CD’s
Savings account
Bonds
Stocks

3. Formulas
𝐴𝑃𝑌= 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑓𝑜𝑟 1 𝑌𝑒𝑎𝑟 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 Amount = Original Principal X Amount of $1.00 (refer to table A14) Compound Interest = Amount – Original Principal

4. Find the APY to the nearest thousandth of a percent on $6,000 for one year at 3.50% compounded quarterly
Amount = Original Principal X Amount of $1.00 Amount = (6,000)( ) Amount = $6, Compound Interest = 6,212.77– 6,000 Compound Interest = $ 𝐴𝑃𝑌= 𝐴𝑃𝑌=3.546%

5. Casey invests $10,000 in a 4-year CD at 4% compounded monthly.
What is the amount after 4 years?
What is the interest earned?
What is the amount after 1 year?
What is the APY to the nearest thousandth of a percent?

6. Casey invests $10,000 in a 4-year CD at 4% compounded monthly.
What is the amount after 4 years?
Amount = Original Principal X Amount of $1.00
Amount = (10,000)( )
Amount = $11,731.99

7. Casey invests $10,000 in a 4-year CD at 4% compounded monthly.
What is the interest earned? (after 4 years)
Interest = 11, – 10,000
Interest = $

8. Casey invests $10,000 in a 4-year CD at 4% compounded monthly.
What is the amount after 1 year?
Amount = Original Principal X Amount of $1.00
Amount = (10,000)( )
Amount = $10,407.42

9. Casey invests $10,000 in a 4-year CD at 4% compounded monthly.
What is the interest earned? (after 1 year)
Interest = 10,407.42– 10,000
Interest = $407.42

10. Casey invests $10,000 in a 4-year CD at 4% compounded monthly.
What is the APY to the nearest thousandth of a percent?
Should we use 4 years or 1 year data?
What does the A stand for in APY?
We are going to use 1 year for our problems
𝐴𝑃𝑌= ,000
𝐴𝑃𝑌=4.074%

11. Any questions?