Annual interest yield (APY) Calculator

The APY Calculator is a powerful tool designed to help you understand the true earning potential of your investments or savings accounts. By factoring in compounding interest, this calculator provides you with insights into how much your money can grow over a specific period.

• What Is Annual Percentage Yield (APY)?
• APY Formula
• How to Calculate APY

What Is Annual Percentage Yield (APY)?

The Annual Percentage Yield (APY) represents the actual rate of return earned on an investment or savings account, considering the effects of compounding interest. Unlike the nominal interest rate, which doesn’t account for compounding, APY gives a more accurate picture of how much you’ll earn in a year.

Key Features of APY:

• Compounding Effect: It includes how often interest is applied (e.g., daily, monthly, annually).
• True Earnings: Reflects your real returns, making it easier to compare financial products.

APY Formula

The formula to calculate APY is straightforward yet powerful:

APY = \left ( 1 + \dfrac{r}{n} \right )^n - 1

Where:

• r = Nominal Interest Rate (as a decimal)
• n = Compounding Frequency (number of compounding periods per year)

How to Calculate APY

Step 1: Gather the Necessary Information

You’ll need the following details:

• Nominal Interest Rate (r): The stated annual interest rate.
• Compounding Frequency (n): How often the interest is applied per year.

Step 2: Apply the APY Formula

Plug the values into the formula:

APY = \left ( 1 + \dfrac{r}{n} \right )^n - 1

Step 3: Convert APY to a Percentage

Multiply the result by 100 to express it as a percentage.

How to Use the APY Calculator

The APY Calculator on this page simplifies the calculation process. Follow these steps:

• Input the Nominal Interest Rate: Enter the stated annual interest rate provided by your financial institution.
• Select the Compounding Frequency: Choose from options such as annually, semi-annually, quarterly, monthly, or daily.
• Enter the Principal Amount: Specify the initial amount you plan to invest or save.
• Enter the Term (Number of Years): Define the duration for which the investment will grow.
• View Results: The calculator will display:
  • APY: Your true annual yield as a percentage.
  • Final Balance: The total amount you’ll have at the end of the term.
  • Total Interest Earned: The interest amount accrued over the term.