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Following our earlier example, if your dividend rate at a credit union is 4.5% and interest is compounded monthly, your APY would be 4.59% for the same account.
The APY reflects the rate of return you can expect on a savings account over the course of a year when compound interest is factored in. The higher the APY, the more interest you can earn.
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You know APR and APY as the three-letter acronyms hiding in tiny font at the bottom of a credit card application or investment prospectus. But no matter how small the print, it's unlikely that you ...
Converting an annual interest rate (that is to say, annual percentage yield or APY) to the monthly rate is not as simple as dividing by 12; see the formula and discussion in APR. However, if the rate is stated in terms of "APR" and not "annual interest rate", then dividing by 12 is an appropriate means of determining the monthly interest rate.
This is a reasonable approximation if the compounding is daily. Also, a nominal interest rate and its corresponding APY are very nearly equal when they are small. For example (fixing some large N), a nominal interest rate of 100% would have an APY of approximately 171%, whereas 5% corresponds to 5.12%, and 1% corresponds to 1.005%.
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As the Fed rate rises, so do APYs on savings accounts, CDs and money market accounts — with today’s rates on the best high-yield savings accounts topping 4% APY. After increasing the target ...