So, for example, if your institution has two almost identical CDs, one of which pays 2.00% payable monthly but only to another account or by ACH out, and the other of which pays 2.00% compounding monthly, the APY on the first will be 2.00% and the APY on the second will be something like 2.02%.
Last edited by John Burnett; 01/17/12 12:42 PM. Reason: to correct an error.
[BTW, I recognize that 2.00% rates are high, but the effect of compounding at more realistic 1.00% levels aren't great enough to provide an illustration.]
John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8