APY Calculator
Calculate the Annual Percentage Yield (APY) for savings accounts and investments.
See how compounding frequency affects your actual returns.
APY Formula:
APY = (1 + r/n)^n - 1
Where:
- r = the nominal (stated) annual interest rate, expressed as a decimal (e.g., 5% = 0.05)
- n = the number of times interest compounds per year
What is compounding? Compounding means you earn interest on your interest. Each time interest is calculated, it gets added to your balance. The next calculation then uses that larger balance. The more often this happens, the more you earn.
Compounding frequencies:
| Frequency | n value | How Often |
|---|---|---|
| Annually | 1 | Once per year |
| Semi-annually | 2 | Every 6 months |
| Quarterly | 4 | Every 3 months |
| Monthly | 12 | Every month |
| Daily | 365 | Every day |
APY vs APR — know the difference:
- APY (Annual Percentage Yield) = the effective rate you EARN on savings and deposits. It includes the effect of compounding.
- APR (Annual Percentage Rate) = the rate you PAY on loans and credit cards. It typically does not include compounding.
When comparing savings accounts, always compare APY — not the nominal rate — because APY accounts for compounding differences.
Practical Example: A savings account offers 5.00% interest compounded daily. APY = (1 + 0.05/365)^365 - 1 = 5.127% On a $10,000 deposit for 1 year: you earn $512.67 instead of $500.00. The extra $12.67 comes entirely from daily compounding.
After 5 years, $10,000 at 5% compounded daily grows to $12,840.03 — compared to $12,500.00 with simple interest. That is $340.03 in extra earnings from compounding alone.
Tips:
- High-yield savings accounts often compound daily, maximizing your APY
- The difference between compounding frequencies is small at low rates but becomes significant at higher rates and longer time periods
- CDs (Certificates of Deposit) may compound at different frequencies — always check the APY, not just the stated rate
- Even a 0.1% difference in APY matters on large balances over many years