APY Calculator

Convert a nominal interest rate into true annual yield based on compounding frequency.

APY Calculator

Convert a nominal interest rate into true annual yield based on compounding frequency.

Nominal annual rate (APR)(%)

Compounding frequency

Enter values above and click Calculate — results will appear here with the formula explained.

APY = (1 + APR/n)ⁿ − 1, where n = compounding periods per year

How does this work?

Two banks can quote the same nominal rate yet pay different interest, purely because of compounding frequency. APY — the effective annual rate — settles the comparison by answering: including compounding, how much does $100 become after exactly one year?

More frequent compounding nudges APY above APR. The effect is small at everyday rates (5% monthly-compounded becomes 5.116% APY) but grows with both rate and frequency, which is why promotional accounts love quoting whichever number flatters them more.

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Disclaimer: Results are estimates for informational purposes only and do not constitute professional financial advice.

Quick Answer

APY Calculator computes convert a nominal interest rate into true annual yield based on compounding frequency. Formula: APY = (1 + APR/n)ⁿ − 1, where n = compounding periods per year. Example: 5% APR compounded monthly yields (1 + 0.

How to Use This Calculator

1Enter the nominal rate the account advertises.
2Select how often it compounds — the fine print always says.
3Compare the resulting APY across accounts; highest APY wins, apples to apples.

Formula Used

APY = (1 + APR/n)ⁿ − 1, where n = compounding periods per year

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Worked Example

5% APR compounded monthly yields (1 + 0.05/12)¹² − 1 = 5.116% APY. The same 5% compounded daily yields 5.127% — slightly better despite the identical headline rate.

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Frequently Asked Questions

QAPR vs APY — which should I compare?

For savings, compare APY — it includes compounding. For loans, APR matters, though loan APR also folds in certain fees by regulation.

QDoes continuous compounding change much?

It sets the ceiling: e^r − 1. At 5% that's 5.127% — essentially the daily figure, which is why banks stop there.

QWhy does my account pay slightly more than its stated rate?

You're seeing APY in action: interest credited monthly starts earning its own interest before the year ends.

Formula Used

APY = (1 + APR/n)ⁿ − 1, where n = compounding periods per year

Frequently Asked Questions

QAPR vs APY — which should I compare?

For savings, compare APY — it includes compounding. For loans, APR matters, though loan APR also folds in certain fees by regulation.

QDoes continuous compounding change much?

It sets the ceiling: e^r − 1. At 5% that's 5.127% — essentially the daily figure, which is why banks stop there.

QWhy does my account pay slightly more than its stated rate?

You're seeing APY in action: interest credited monthly starts earning its own interest before the year ends.