Definition of "Effective Annual Yield"

Most companies compound and credit interest daily. The rate shown is the effective annual yield after compounding the daily nominal rate. Some companies pay a first year bonus on their interest to encourage new business. The Effective Annual Yield (EAY) includes the bonus. ? Rate Bonus o Some annuities pay a bonus on the base rate. For example, if the base rate is 6.00% and there is a 1.00% first year bonus, the EAY will be 7.00%. ? Premium Bonus o Some annuities pay an upfront premium bonus. For example, if the base rate is 6.00% with a 1.00% premium bonus, 7.06% will be shown as the Effective Annual Yield.