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What is the best single figure for comparing potential earnings across different deposit accounts?
ACompare the annual percentage yield of each account
BCompare the minimum balance each account requires
CCompare the monthly fee charged on each account
DCompare the withdrawal limit set on each account
Answer & Solution
Correct answer: A. Compare the annual percentage yield of each account
1. Accounts differ in stated rate and in how often they compound, so a bare rate misleads.
2. Annual percentage yield puts both of those on one yearly scale.
3. That makes it the best figure for comparing what two accounts would earn.
4. Minimum balance and withdrawal limits shape access to the money rather than earnings.
5. A monthly fee reduces what is left, but it does not measure what the account pays.
_Source: FDIC Money Smart for Adults (September 2018), Module 5: Your Savings, section Annual Percentage Yield (APY)_
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