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Glossary Finance

APY

APY (annual percentage yield) is the real yearly return on savings once compounding is included.

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In more detail

The formula is APY = (1 + r/n)^n − 1, where r is the nominal annual rate and n the compounding periods per year. The more often interest is added, the higher the APY for the same nominal rate. Use APY to compare savings accounts. See Compound interest.

Example

A 5% rate compounded monthly has an APY of 5.12%.

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Compound Interest Calculator

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See also

  • Glossary APR
    APR (annual percentage rate) is the yearly cost of borrowing, expressed as a percentage, that includes the interest rate plus certain fees.
  • Glossary Compound interest
    Compound interest is interest calculated on the original amount plus all the interest already added, so growth builds on itself.
  • Guide How Compound Interest Works
    The compound interest formula with a worked $10,000 example, how compounding frequency matters, APR versus APY.
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