📋 APY Calculator
Convert between APR (Annual Percentage Rate) and APY (Annual Percentage Yield). Understand how compounding frequency affects the true return on your savings accounts, CDs, and investments.
| Frequency | APY |
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APY Formula
Real-World Example
5% APR compounded monthly (n = 12):
Frequently Asked Questions
APR (Annual Percentage Rate) is the stated nominal interest rate without accounting for compounding within the year. APY (Annual Percentage Yield) reflects the actual return after compounding is applied over a year. APY is always greater than or equal to APR. When comparing savings accounts, always compare APY for an accurate comparison.
More frequent compounding means interest is calculated and added to your balance more often, so future interest calculations include previously earned interest sooner. Daily compounding produces the highest effective yield, though the difference between daily and monthly compounding is typically very small (a few basis points).
Always compare APY, not APR. Two accounts may advertise the same nominal rate but have different APYs based on compounding frequency. For example, 5% APR compounded daily yields 5.127% APY, while 5% APR compounded annually yields exactly 5% APY.
Higher compounding frequency is better for savers (more frequent = higher APY). Daily compounding is the most favorable. For borrowers, less frequent compounding is better. Most high-yield savings accounts and CDs compound daily or monthly.
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