APY shows the true yearly return after compounding. Compare accounts fairly by converting rate plus frequency to APY.
How the APY Calculator works
APY (annual percentage yield) converts a nominal rate plus its compounding frequency into the true yearly return: APY = (1 + r/n)ⁿ − 1.
Example calculation
A 5% nominal rate compounded monthly equals an APY of about 5.12% — the real return after compounding.
Tips for using the APY Calculator
- Compare accounts by APY, not nominal rate.
- More frequent compounding raises APY.
- APY is always ≥ the nominal rate.
APY Calculator — frequently asked questions
- APR vs APY?
- APR ignores compounding; APY includes it. APY is always equal to or higher than the nominal rate.
- Why does frequency matter?
- More frequent compounding produces a higher effective yield from the same nominal rate.
- APR vs APY?
- APR ignores compounding; APY includes it. Savers should compare APY.
- Why do banks advertise APY?
- It reflects the actual yearly earnings a saver receives.
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