APY Calculator
Calculate the effective annual yield from any nominal rate and compounding frequency.
APY at All Compounding Frequencies
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This calculator converts a nominal (stated) interest rate into the annual percentage yield based on how often interest compounds. Here is how to use it:
- Enter the nominal interest rate. This is the stated annual rate on a savings account, CD, or other financial product. For example, if your bank advertises 5%, enter 5.
- Select the compounding frequency. Choose how often interest is calculated and added to your balance. Most savings accounts compound daily or monthly. CDs often compound daily or quarterly.
- Read the result. The APY shows your true annual return after compounding. The comparison table below shows the APY at every standard compounding frequency so you can see how frequency affects yield.
Results update instantly as you change inputs. Use the Share button to send a pre-filled link, or Copy to grab the result.
About APY
APY stands for Annual Percentage Yield. It represents the real rate of return on a deposit or investment, accounting for the effect of compounding interest. When interest compounds more frequently, you earn interest on previously earned interest sooner, which increases the effective yield.
The formula is: APY = (1 + r/n)^n - 1, where r is the nominal rate (as a decimal) and n is the number of compounding periods per year. At a 5% nominal rate, daily compounding yields 5.1267% APY while annual compounding yields exactly 5%. The difference grows with higher rates and more frequent compounding. All calculations run entirely in your browser. No data is sent anywhere.
Frequently Asked Questions
What is the difference between APR and APY?
APR (Annual Percentage Rate) is the nominal rate without compounding. APY (Annual Percentage Yield) includes the effect of compounding. For savings products, APY is always equal to or higher than APR because it reflects the additional interest earned from compounding. Banks are required to disclose APY on deposit accounts so you can compare products accurately.
Does compounding frequency really matter?
Yes, though the impact depends on the interest rate. At low rates (1-3%), the difference between daily and annual compounding is small. At higher rates (8-10%+), more frequent compounding produces a noticeably larger yield. For a 10% nominal rate, daily compounding gives you 10.5156% APY while annual compounding gives exactly 10%.
What is continuous compounding?
Continuous compounding is the theoretical limit where interest compounds an infinite number of times per year. The formula is APY = e^r - 1, where e is Euler's number (approximately 2.71828). In practice, daily compounding (365 periods) is very close to continuous compounding, so most financial products stop at daily.
Why do banks advertise APY instead of APR for savings?
Federal regulations (Truth in Savings Act) require banks to disclose APY on deposit accounts. Since APY is always equal to or higher than the nominal rate, it gives consumers an accurate picture of what they will earn. For loans, APR is the standard disclosure because it shows borrowers the baseline cost before compounding works against them.