APY Calculator
Enter a nominal APR and how often it compounds. You get the effective APY and what that yield means on a sample balance over one year.
APY = (1 + APR/n)^n − 1, where n is compounding periods per year. The "earned" figure is before taxes.
Frequently asked questions
What is APY and how is it different from APR?
APR (Annual Percentage Rate) is the nominal yearly rate before compounding. APY (Annual Percentage Yield) is the real effective rate after compounding is taken into account. The more often interest compounds, the further APY pulls ahead of APR. The formula is APY = (1 + APR/n)^n − 1, where n is the number of compounding periods per year.
Why does daily compounding pay more than annual?
Because you earn interest on interest more frequently. At an 5% APR, annual compounding gives exactly 5% APY, but daily compounding (365 periods) gives about 5.13% APY — the difference is small on a savings account but grows with the rate and the amount invested.
Should I compare bank accounts by APR or APY?
Always compare by APY. Banks quote APY for deposit accounts precisely so you can compare the real return. Two accounts advertising the same APR can have very different APYs if one compounds daily and the other annually.
Does APY matter for loans?
Loans are usually quoted in APR because that is what regulators require for disclosure, and compounding on loans works against you. The APY concept still applies — a loan that compounds daily costs more than one that compounds monthly at the same APR — but for borrowing you should focus on the APR and any fees.