APY

APY (Annual Percentage Yield) is the effective annual return on a savings or investment product, including compounding. Computed as APY = (1 + r/n)ⁿ − 1 where r is the nominal annual rate and n is the number of compounding periods per year.

APY is distinct from APR, which excludes compounding. A 6% APR compounded monthly is roughly 6.17% APY — the difference grows with rate and compounding frequency. Banks quote APY for savings accounts (where they want to overstate returns) and APR for loans (where they want to understate cost).

Compute the future value of any APY scenario in our compound interest calculator.