# Annual Percentage Yield (APY)

- From Investopedia (1-9-2020):

"*The annual percentage yield (APY) is the real rate of return earned on a savings deposit or investment taking into account the effect of compounding interest.*

*Unlike simple interest, compounding interest is calculated periodically and the amount is immediately added to the balance. With each period going forward, the account balance gets a little bigger, so the interest paid on the balance gets bigger as well."*

## Basics

- Often used besides but should not be confused with APR

- From Investopedia (1-9-2020):

"*The annual percentage yield (APY) is the real rate of return earned on a savings deposit or investment taking into account the effect of compounding interest.*

*Unlike simple interest, compounding interest is calculated periodically and the amount is immediately added to the balance. With each period going forward, the account balance gets a little bigger, so the interest paid on the balance gets bigger as well."*

- From APRtoAPY (18-1-2022):

*"It's a standard evaluation of return based on one year. You'll run into this most often when considering deposit accounts, and how much you'll earn on your deposit.*

*How do you convert APR to APY?*

*APY = [1 + (APR / Number of Periods)]^(Number of Periods) - 1*

*To calculate APY using APR:*

*Take APR and divide it by the number of compounding periods.**Add 1 to the result.**Raise the result by the Number of Compounding Periods.**Subtract 1 from the result.*

*The result is your Annual Percentage Yield expressed as a percentage."*