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📈 APY Calculator

Calculate the Annual Percentage Yield (APY) on a savings account or investment from its stated interest rate and compounding frequency.

Account Details

Your Result

Annual Percentage Yield (APY)

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Stated Rate (APR)

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Interest Earned (1 yr)

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Balance After 1 Year

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APY reflects the effect of compounding within a year, so it is always slightly higher than the stated APR (except with annual compounding, where they're equal).

How the APY Calculator Works

Annual Percentage Yield (APY) is the real rate of return on a deposit account after accounting for the effect of compounding interest within the year, unlike APR (Annual Percentage Rate), which is the simple stated rate before compounding.

Formula

APY = (1 + r/n)ⁿ − 1
Where r = stated annual interest rate (as a decimal), n = number of compounding periods per year
Continuous compounding: APY = eʳ − 1

Worked Example

A savings account advertises a 5% APR compounded monthly (n = 12). APY = (1 + 0.05/12)¹² − 1 ≈ 5.12%. On a $10,000 deposit, that's about $511.62 in interest over one year — slightly more than the $500 you'd earn with simple annual compounding.

APY vs. APR — What's the Difference?

APR is the simple annual interest rate without accounting for compounding. APY includes the effect of compounding, so it's a more accurate measure of what you'll actually earn (on savings) or pay (on loans that quote APY). When comparing savings accounts or CDs, always compare APY, not APR — a higher compounding frequency at the same APR produces a higher APY.

Frequently Asked Questions

What is APY?

APY (Annual Percentage Yield) is the effective annual rate of return on a deposit account, accounting for the effect of compounding interest during the year.

What's the difference between APY and APR?

APR is the simple stated interest rate before compounding. APY includes the effect of compounding, so it's always equal to or higher than the APR for the same account.

Does more frequent compounding always mean higher APY?

Yes, for the same stated APR, more frequent compounding (daily vs. monthly vs. annually) produces a higher APY, though the difference shrinks as compounding frequency increases.