APY Calculator
Turn a stated interest rate and its compounding frequency into the annual percentage yield (APY) — the number that lets you compare savings accounts fairly — and see the interest you'd earn in a year.
Two accounts can advertise the same interest rate yet pay different amounts, because how often interest compounds changes what you actually earn. APY folds the compounding into a single yearly figure, which is why banks are required to quote it — and why it's the right number to compare offers.
How to calculate APY
Take the nominal rate, divide it by the number of compounding periods in a year, add one, raise it to the power of that number of periods, and subtract one.
where r = rate (as a decimal), n = compounding periods per year
| Term | Meaning |
|---|---|
| r | The stated annual rate, e.g. 5% = 0.05 |
| n | Times per year interest compounds (12 for monthly, 365 for daily) |
| APY | The effective yearly yield after compounding |
APY vs APR: what's the difference?
APR (annual percentage rate) is the simple stated rate and ignores in-year compounding. APY (annual percentage yield) includes it. For the same nominal rate, more frequent compounding means a higher APY. On loans you'll usually see APR; on savings you'll see APY — and the gap between them is exactly the effect of compounding.
| Compounding of 5% | APY |
|---|---|
| Annually | 5.000% |
| Quarterly | 5.095% |
| Monthly | 5.116% |
| Daily | 5.127% |
Worked example
A 5% rate compounded monthly (n = 12):
| APY = (1 + 0.05 ÷ 12)12 − 1 | 5.116% |
| Interest on $10,000 | $511.62 |
| Balance after one year | $10,511.62 |
The same 5% compounded only once a year would earn exactly $500 — so monthly compounding adds about $11.62 on a $10,000 balance.