(APY) Annual Percentage Yield


Annual Percentage Yield (APY) expresses an annual rate of interest taking into account the effect of compounding. It is always greater than or equal to the Annual percentage rate (APR) because APR does not take compounding into effect.

Equation

APY

Where:

inom is the Nominal interest rate and
N is the number of compounding periods per year.

The Annual Percentage Yield does not take transaction costs on loans or savings accounts into account, see also Annual percentage rate. To promote financial products, banks and other firms will often quote the APY, as opposed to the APR, because it represents the costumer receiving a higher return at the end of the term.