An account has a rate of 4.2%. Find the effective annual yield if the interest is compounded 1000 times per year. What is the effective annual yield? (round to the nearest hundredth as needed)

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Here are 5 related questions:
1. How does the EAY change if compounded continuously instead of 1000 times per year?
2. What would the EAY be if the interest rate was 5% compounded 1000 times per year?
3. Can you explain how increasing the number of compounding periods affects the EAY?
4. What is the EAY for an interest rate of 4.2% compounded quarterly?
5. How does the EAY compare for compounding 1000 times per year versus compounding daily?

**Tip:** The closer the compounding frequency gets to continuous, the smaller the difference in EAY becomes!

Learn how to calculate the effective annual yield for an account with an interest rate of 4.2%, compounded 1000 times per year. This problem uses the formula for EAY and covers important financial concepts like compounding and exponential growth. Suitable for Grades 11-12.

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