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Hello. I found this question and i do not have the answer. Can you please help me with it.
Qu) Interest on 3 months US $ deposits is 1.4875% p.a. calculate the annual percentage rate (APR) and Annual percentage yield (APY).There is no point in attempting questions for which you do not have answer! You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and workings!!
APR and APY are the same (although APR usually refers to the annual rate paid on borrowings, whereas APY usually refers to the annual rate being received on deposits).
The calculation is revision from Paper MA (was F2) but is explained again in my free lectures for Paper FM.
The interest every 3 months is 1.4875/4 (because there are 4 periods of 3 months in a year) and so is 0.37185% (or 0.0037185).
To go from a period interest rate to an annual rate, then 1+R = (1+r)^n , where R is the annual rate, r is the period rate, and n is the number of periods.
So in this case, 1+ R = 1.0037185^4, therefore R = 0.014957 or 1.4957% p.a.
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