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Annual percentage yield (APY) is a normalized representation of an interest rate, based on a compounding period of one year. APY figures allow a reasonable, single-point comparison of different offerings with varying compounding schedules. However, it does not account for the possibility of account fees affecting the net gain.
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.
Another way of defining APY is that it represents the real rate of return you can earn in one year if interest is compounded. And the more often interest is compounded, the higher the APY will be ...
APY is a popular metric that allows holders of deposit accounts to accurately understand the amount of interest income generated by their account.
The term annual percentage rate of charge (APR), [1] [2] corresponding sometimes to a nominal APR and sometimes to an effective APR (EAPR), [3] is the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, [4] etc. It is a finance charge expressed as an annual rate.
Key financial terms like APY and APR can be confusing to interpret, especially when factored into the true cost of borrowing money or the parameters of spending it. Whether you are looking for a...
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.
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 ...