Banks advertise savings accounts by APY because it includes compounding; loans are usually quoted by APR. The more often interest compounds, the higher the APY for the same APR.
How to use the APY Calculator
- Annual percentage rate (APR)
- Compounding frequency
- Initial deposit
- Term
- Every result field is editable: type into Annual percentage yield (APY) and Annual percentage rate (APR) plus every other field update to match.
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the APR, the compounding frequency, the deposit and the term.
Tips
- Use the nominal annual rate and pick the compounding frequency your bank or broker states.
- Small differences in return or fees compound into large differences over decades.
- Run the calculation with a cautious, a central and an optimistic return to see the range of outcomes.
- Past returns do not guarantee future returns – nothing here is investment advice.
Common mistakes to avoid
- Comparing an APR with an APY or effective rate.
- Ignoring inflation, taxes and fees when judging a real return.
- Entering a percentage as a decimal (5 instead of 0.05 is correct here).
Inputs explained
| Field | What to enter |
|---|---|
| Annual percentage rate (APR) | In % |
| Compounding frequency | Choose one: Yearly, Semi-annually, Quarterly, Monthly … |
| Initial deposit | Amount in your currency |
| Term | Units: years, months |
What each result means
- Annual percentage yield (APY) = effr([Annual percentage rate (APR)]÷100, [Compounding frequency])×100
- Final deposit = [Initial deposit]×(1 + [Annual percentage yield (APY)]÷100)^[Term]
- Interest earned = [Final deposit] – [Initial deposit]
Example values
How the main result changes when Annual percentage rate changes and everything else stays at the example values above:
| Annual percentage rate (APR) (%) | Annual percentage yield (APY) (%) |
|---|---|
| 2.25 | 2.273 |
| 3.38 | 3.428 |
| 4.5 | 4.594 |
| 5.63 | 5.772 |
| 6.75 | 6.963 |
| 9 | 9.381 |
Formula
APY = (1 + APR ÷ n)^n − 1Continuous compounding: APY = e^APR − 1Final balance = deposit × (1 + APY)^yearsWorked example
Inputs — Annual percentage rate (APR): 4.5 %; Compounding frequency: Monthly; Initial deposit: $10,000; Term: 1 years.
Results — Annual percentage yield (APY) = 4.594 %; Final deposit = $10,459.40; Interest earned = $459.40.
Frequently asked questions
What is the difference between APR and APY?
APR is the simple yearly rate; APY includes the effect of compounding.
Is daily compounding much better than monthly?
Only slightly – at 4.5% APR, APY is 4.594% monthly and 4.602% daily.
Which should I compare for savings?
APY – it shows what you actually earn in a year.
What formula does the APY Calculator use?
APY = (1 + APR ÷ n)^n − 1.