APY Calculator

Updated: Oct 24, 2018

FINANCE INTEREST

APY Calculator is used to calculate the Annual Percentage Yield, a normalized representation of an interest rate based on a compounding period of one year.

APY:

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The Annual Percentage Yield (APY)

Background Information

What does Annual Percentage Yield mean?: The annual percentage yield is the effective annual rate of return. It is calculated by the resultant percentage that assumes funds will remain in the investment vehicle for a full 365 days.

Importance of Bond Yield: The annual percentage yield is the rate of interest earned or accrued over the course of a year or 365 days. It takes into account the effect of compounding. The annual percentage yield gives you a better sense of an investment's true return, and of a loan's true cost.

Formula

APY = (1 + r/n)n - 1

Where:-

r = stated annual interest rate (nominal interest rate)
n = number of compounding periods per year

Example: An account has a rate of 6% compounded monthly and the number of times compounded would be 12 one year (12 months). Therefore, according to the formula, the annual percentage yield (APY) is 6.1%.

History

May 15, 2018: Tool Launched

Created: May 15, 2018

Online Tool Designed For: Windows, OS X, Android, iOS, Linux