APY Calculator
Calculate the Annual Percentage Yield (APY) from your investment. APY takes into account compound interest, showing you the true rate of return you'll earn on your savings account, CD, or other investment over a year.
APY: 0%
| Initial Investment | $0.00 |
|---|---|
| Total Interest Earned | $0.00 |
| Final Balance | $0.00 |
| Effective Annual Rate | 0% |
| Total Return | 0% |
About APY Calculator
The Annual Percentage Yield (APY) is the real rate of return earned on an investment, taking into account the effect of compounding interest. Unlike simple interest, compounding interest is calculated periodically and the amount becomes immediately available to begin earning more interest in the next period.
How to Calculate APY
To calculate the APY:
- Determine the nominal interest rate (stated rate)
- Determine the number of compounding periods per year
- Apply the formula: APY = (1 + r/n)^n - 1 where r is the nominal rate and n is the number of compounding periods
- For continuous compounding: APY = e^r - 1 where e is Euler's number (~2.71828)
Why APY Matters
APY gives you a true picture of your potential earnings. When comparing investment options, the APY can help you understand which option will provide the best return, even if they have different compounding frequencies. The more frequently interest is compounded, the higher the APY will be compared to the nominal rate.
APY vs. APR
While APY shows the effective annual rate including compounding, APR (Annual Percentage Rate) typically refers to the simple interest rate without compounding. For investments, APY is the more important figure as it shows your actual earnings potential.