📈 APY Calculator
Convert nominal APR to Annual Percentage Yield (APY) accounting for compounding frequency.
APY vs APR — What's the Difference?
APR (Annual Percentage Rate) is the nominal interest rate before compounding. APY (Annual Percentage Yield) is the actual return after compounding is applied. The more frequently interest compounds, the higher the APY relative to APR. A 5% APR compounded daily produces an APY of 5.127% — $12.70 more per year on a $10,000 deposit than simple annual compounding.
APY Formula
APY = (1 + APR/n)^n − 1, where n = number of compounding periods per year. For daily compounding at 5% APR: APY = (1 + 0.05/365)^365 − 1 = 5.127%.
People Also Ask
Yes — APY is always equal to or greater than APR, never lower. The difference grows with compounding frequency. Daily compounding produces a higher APY than monthly, which is higher than annual. When comparing savings accounts, always compare APY — it's the true return.
The more frequent, the better for savers. Daily compounding (365x/year) produces the highest APY from a given APR. Most high-yield savings accounts compound daily. CDs typically compound daily or monthly. The difference between daily and monthly compounding is small but measurable over time.