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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.
That APY accounts for the simple interest rate and the additional interest due to monthly compounding earned in a year. If you had $10,000 in the account, you’d earn $500 in interest after one year.
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 ...
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%.
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.
However, if the APY were compounded monthly, the effective rate would be 5.12%, and you would earn $51.16 in interest. Is APY paid monthly? APY is paid in set periods.
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APY — which stands for annual percentage yield — is the percentage of your money that you can earn back in interest when you deposit it at a financial institution. Unlike APR, which shows how ...
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