Calculate annual percentage yield and compound interest.
APY = (1 + r/n)^n − 1, where r is the nominal annual rate and n is compounding periods per year.
A 5% nominal rate compounded monthly yields an APY of about 5.12%.
Annual Percentage Yield is the effective yearly return after compounding, making it the best figure for comparing savings products.
More frequent compounding raises the APY for the same nominal rate, though the difference is small at low rates.
No. APR is the cost of borrowing and usually excludes compounding, while APY is the yield on savings and includes compounding.
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