Question: When selling a CD, is the APY disclosed on the CD the advertised Yield or the actual yield they will earn based on the rate and interest payment terms?
Answer: I asked my colleague, Andy Zavoina, to reply to this question. Here's what Andy said:
Appendix A to Reg. DD describes the APY calculation for both advertising and for account disclosures. The same formula is used. In disclosing the CD's APY, you will use the actual terms of the CD. Those may be the same as if
you were advertising the CD or it may be more specific since a 3-month CD
may be 90 days or 3 calendar months. The number of actual days may vary
between these.
A separate formula is used for the APY Earned.
The original version appeared in the July/August 2003 edition of the Oklahoma Bankers Association Compliance Informer.
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