Annual Percentage Yield (APY) is the effective annual rate, or real rate, of return of an investment if the interest earned each period is compounded. Annual Percentage Yield (APY) considers the effects of compounding, since advertised rates are typically the rates of return for simple interest.

The Annual Percentage Yield (APY) is the interest rate earned on an investment in one year, including compounding interest. A higher APY is better as your return will be higher. You can compare APYs at different financial institutions to ensure you're opening an account with the highest possible return.

• APY is the actual rate of return that will be earned in one year if the interest is compounded.

• The more often interest is compounded, the higher the APY will be.

• APY has a similar concept as Annual Percentage Rate (APR), but APR is used for loans.

• The APY on checking, savings, or certificate of deposit holdings will vary across products and may have a variable or fixed rate.

Calculation of Annual Percentage Yield (APY)

APY standardizes the rate of return. It does this by stating the real percentage of growth that will be earned in compound interest assuming that the money is deposited for one year. The formula for calculating APY is:

$\begin{array}{cc}{\displaystyle }& {\displaystyle \text{APY}=(1+\frac{�}{�}{)}^{�}-1}\\ {\displaystyle }& {\displaystyle \text{where:}}\\ {\displaystyle }& {\displaystyle �=\text{Nominal rate}}\\ {\displaystyle }& {\displaystyle �=\text{Number of compounding periods}}\end{array}$

Annual Percentage Yield (APY) Calculator, it is a tool that enables you to calculate the actual interest earned on an investment over your term.