APY Calculator
Convert a nominal rate (APR) into the effective annual yield (APY) for a compounding frequency.
Your details
- Nominal rate
- 5.00%
Formula
APY = (1 + nominal ÷ n)^n − 1, where n is the number of compounding periods per year.
How it works
APY converts a nominal rate into the true annual return once compounding is counted. The more often interest compounds, the higher the APY climbs above the nominal rate.
Frequently asked questions
What's the difference between APR and APY?⌄
APR is the simple nominal rate; APY includes the effect of compounding. For savings, a higher APY means more interest earned, and the gap widens with more frequent compounding.
Why do two accounts with the same rate earn differently?⌄
Because compounding frequency differs. An account compounding daily earns slightly more than one compounding annually at the same nominal rate.
Should I compare savings accounts by APY?⌄
Yes. APY is the standardized figure that already includes compounding, so it is the fair way to compare deposit accounts.
Sources & methodology
- •U.S. SEC — compound interest — SEC
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