question 1 (1 point)\na bank offers a savings account with 5% apr, compounded monthly. which is closest to…

question 1 (1 point)\na bank offers a savings account with 5% apr, compounded monthly. which is closest to the apy?\n a 5.25%\n b 5.12%\n c 5.00%\n d 5.05%\n\nquestion 2 (1 point)\napr is different from apy because:\n a apr and apy are always the same.\n b apr is always bigger than apy.\n c apr includes compounding, apy does not.\n d apy includes compounding, apr does not.

question 1 (1 point)\na bank offers a savings account with 5% apr, compounded monthly. which is closest to the apy?\n a 5.25%\n b 5.12%\n c 5.00%\n d 5.05%\n\nquestion 2 (1 point)\napr is different from apy because:\n a apr and apy are always the same.\n b apr is always bigger than apy.\n c apr includes compounding, apy does not.\n d apy includes compounding, apr does not.

Answer

Explanation:

Step1: Recall the APY formula

The formula for APY is $APY=(1 + \frac{r}{n})^{n}-1$, where $r$ is the annual - percentage rate (APR) and $n$ is the number of compounding periods per year. Given $r = 0.05$ and $n=12$ (compounded monthly).

Step2: Substitute values into the formula

$APY=(1+\frac{0.05}{12})^{12}-1$. First, calculate $\frac{0.05}{12}\approx0.004167$. Then $1+\frac{0.05}{12}=1 + 0.004167=1.004167$. Next, $(1.004167)^{12}\approx1.051162$. So, $APY = 1.051162-1=0.051162\approx5.12%$.

Step3: Answer Question 2

APR is the annual percentage rate and is a simple - interest rate that does not take into account the effect of compounding. APY (annual percentage yield) takes into account the compounding effect over a year. So, APY includes compounding and APR does not.

Answer:

Question 1: b. 5.12% Question 2: d. APY includes compounding, APR does not.