APY Calculator (Annual Percentage Yield)

What is APY (Annual Percentage Yield)?

APY (Annual Percentage Yield) is the real rate of return earned on an investment, taking into account the effect of compounding interest. Unlike simple interest, APY considers that interest is periodically added to the principal, so future interest calculations include previously earned interest.

How to Use This APY Calculator

1. Enter your initial investment – The amount you’re starting with
2. Enter the nominal interest rate – The stated annual rate before compounding
3. Select compounding frequency – How often interest is calculated and added
4. Enter investment period – Number of years you’ll keep the investment
5. Click “Calculate APY” – See your effective annual return and growth

APY Formula

The APY is calculated differently based on compounding frequency:

Periodic Compounding:

Where:
r = nominal annual interest rate (as decimal)
n = number of compounding periods per year

Continuous Compounding:

Where:
e = Euler’s number (~2.71828)
r = nominal annual interest rate (as decimal)

Why APY Matters

• Accurate comparisons – Compare different investment options fairly
• Understand compounding – See how frequency affects your returns
• Financial planning – Project realistic investment growth
• Maximize returns – Identify accounts with better compounding terms

APY vs. APR

	APY	APR
Definition	Annual Percentage Yield	Annual Percentage Rate
Includes	Compounding interest	Simple interest only
Used For	Investments, savings accounts	Loans, credit cards
Which is higher?	APY ≥ APR	APR ≤ APY

Typical APY Rates

Account Type	Typical APY Range
Savings Accounts	0.5% – 4.5%
Money Market Accounts	1.0% – 5.0%
Certificates of Deposit (CDs)	1.5% – 5.5%
High-Yield Savings	3.0% – 6.0%