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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.
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 ...
The terms "APY" and "interest rate" are often used interchangeably when people discuss savings and investments, but there's a very important distinction between the two. While it's important to...
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.
APY is a popular metric that allows holders of deposit accounts to accurately understand the amount of interest income generated by their account.
It established uniformity in the disclosure of terms and conditions regarding interest and fees when giving out information on or opening a new savings account. On passing this law, the US Congress noted that it would help promote economic stability, competition between depository institutions, and allow the consumer to make informed decisions.
For example, suppose you have a savings account with an APY of 5 percent. That APY accounts for the simple interest rate and the additional interest due to monthly compounding earned in a year. If ...