💰 APY Calculator
Calculate Annual Percentage Yield (APY) from nominal interest rate
How to Use This Calculator
Enter Nominal Interest Rate
Input the stated annual interest rate (e.g., 5.0% for a savings account).
Select Compounding Frequency
Choose how often interest is compounded (annually, monthly, daily, etc.).
Calculate APY
Click "Calculate APY" to see the effective annual yield, which accounts for compounding.
Formula
APY = (1 + r/n)n - 1
Where: r = nominal interest rate (as decimal), n = compounding frequency per year
Example Calculation:
For a 5% nominal rate compounded monthly (12 times per year):
Step 1: Convert rate to decimal
r = 5% = 0.05
Step 2: Apply APY formula
APY = (1 + 0.05/12)12 - 1
APY = (1.004167)12 - 1
APY = 1.051162 - 1 = 0.051162
APY = 5.12%
About APY Calculator
The APY (Annual Percentage Yield) calculator helps you determine the effective annual return on an investment or savings account, accounting for the effects of compounding interest. APY is the actual rate of return you'll earn in a year, considering how often interest is compounded. This is crucial for comparing different savings accounts, CDs, and investment products because it shows the true annual return, not just the nominal interest rate.
When to Use This Calculator
- Comparing Savings Accounts: Compare APY across different banks to find the best savings account
- Certificate of Deposit (CD): Calculate the effective yield on CDs with different compounding frequencies
- Investment Products: Understand the true annual return on investment products
- Financial Planning: Project future savings growth with accurate APY calculations
- Loan Comparison: Compare effective interest rates on loans and credit products
Why Use Our Calculator?
- ✅ Accurate APY: Calculates the true annual yield accounting for compounding
- ✅ Multiple Frequencies: Supports all common compounding frequencies from annual to daily
- ✅ Easy Comparison: Compare APY across different accounts and products
- ✅ 100% Free: No registration or payment required
- ✅ Mobile Friendly: Works seamlessly on all devices
- ✅ Clear Results: Shows APY advantage over nominal rate for easy understanding
Common Applications
Savings Account Comparison: When choosing between savings accounts, compare their APY rather than nominal rates. A 5% nominal rate compounded monthly yields 5.12% APY, while the same rate compounded daily yields 5.13% APY.
CD Investment Decisions: Calculate and compare APY on different CD terms and compounding frequencies to maximize your returns. Higher compounding frequency means higher APY for the same nominal rate.
Retirement Planning: Use APY to accurately project how your savings will grow over time, helping you plan for retirement and other long-term financial goals.
Investment Product Evaluation: Compare the APY of different investment products to make informed decisions about where to allocate your funds for maximum returns.
Tips for Best Results
- Always compare APY, not just nominal rates, when choosing between savings products
- Higher compounding frequency generally means higher APY for the same nominal rate
- Look for accounts with the highest APY for better returns on your savings
- Remember that APY assumes interest is reinvested and compounds over the year
- Check if there are any fees or minimum balance requirements that could affect your actual returns
Frequently Asked Questions
What is APY?
APY (Annual Percentage Yield) is the effective annual rate of return on an investment, accounting for the effects of compounding interest. It shows the actual return you'll earn in a year, making it easier to compare different financial products.
What's the difference between APR and APY?
APR (Annual Percentage Rate) is the nominal interest rate without compounding, typically used for loans. APY (Annual Percentage Yield) accounts for compounding and is used for savings and investments. APY is always equal to or higher than APR.
Does compounding frequency affect APY?
Yes! The more frequently interest compounds, the higher the APY. For example, a 5% rate compounded monthly (5.12% APY) is better than the same rate compounded annually (5.00% APY). Daily compounding yields the highest APY.
Is APY the same as interest rate?
No. The interest rate (nominal rate) is the base rate without compounding. APY is the effective rate that includes compounding. APY is always equal to or higher than the nominal interest rate.
Why is APY important?
APY shows the true annual return on your investment, making it the standard metric for comparing savings accounts, CDs, and other financial products. It helps you make informed decisions about where to invest your money for maximum returns.