Question 1

What is APY?

Accepted Answer

APY (Annual Percentage Yield) is the real rate of return earned on an investment or savings account over one year, taking into account the effect of compounding interest. APY is always higher than or equal to the nominal APR when compounding occurs more than once per year.

Question 2

How is APY calculated?

Accepted Answer

APY is calculated using the formula: APY = (1 + r/n)^n - 1, where r is the nominal annual interest rate (APR) as a decimal, and n is the number of compounding periods per year. More frequent compounding results in a higher APY.

Question 3

What is the difference between APR and APY?

Accepted Answer

APR (Annual Percentage Rate) is the simple annual interest rate without compounding. APY (Annual Percentage Yield) includes the effect of compounding. For example, 12% APR compounded monthly gives an APY of about 12.68%, meaning you earn slightly more than the nominal rate.

Question 4

Is this APY calculator free?

Accepted Answer

Yes, this APY calculator is 100% free and runs entirely in your browser. No data is sent to any server and no signup is required.