Security National Bank is quoting 1year certificates of depo

Security National Bank is quoting 1-year certificates of deposit with an interest rate of 12% compounded semiannually. Joe Saver purchased a $6,200 CD. What is the CD’s effective rate (APY)?

Solution

APY = 6200(1 + 24 / 100) = 6200 X1.24 = 124 X 62 = 7688

CDs effective rate = 7688 - 6200 = 1488.