APY Calculator

APY (annual percentage yield) is the effective annual rate of return on a deposit once compounding is taken into account. Unlike the stated nominal rate, it reflects the interest you earn on previously earned interest over a year.

APY = (1 + r/n)ⁿ − 1, where r is the nominal annual rate as a decimal and n is the number of compounding periods per year. Multiply by 100 to express it as a percentage.

APR is the simple nominal annual rate without compounding, typically used for what you pay on borrowing. APY includes the effect of compounding and is used for what you earn on savings. For the same nominal rate, APY is always at least as high as APR.

The interest rate (nominal rate) is the stated rate before compounding. APY is the effective yield after compounding within the year. A 5% rate compounded monthly produces a 5.12% APY.

Because interest is added to the balance during the year and then itself earns interest. The more frequently interest compounds, the more of this “interest on interest” accrues, so the effective yield rises above the stated rate.

More frequent compounding raises the APY. For a 5% nominal rate, annual compounding gives exactly 5.00%, monthly gives about 5.12%, and daily gives about 5.13%. The increase is bounded above by continuous compounding (e^r − 1).

When compounding is annual (n = 1), there is no compounding within the year, so the APY equals the nominal rate exactly. A 6% rate compounded annually is a 6.00% APY.

No. APY is a pure percentage that depends only on the nominal rate and the compounding frequency — it is the same whether you deposit $100 or $1,000,000. The principal only scales the dollar amount of interest you earn, not the yield.

Enter a principal and the calculator multiplies it by the APY: interest earned (1 year) = principal × APY. For example, $10,000 at a 2.53% APY earns about $252.88 in the first year, for an ending balance of $10,252.88.

Not necessarily. APY assumes a constant rate, all interest reinvested, and no fees or taxes. Account fees, minimum-balance penalties, variable or teaser rates, and tax on interest all reduce the yield you actually realise.

Under the Truth in Savings Act (Regulation DD, 12 CFR Part 1030), banks must disclose APY using a standardised formula based on realised interest: APY = 100 × [(1 + Interest/Principal)^(365/Days in term) − 1]. For one year of compounding this gives the same figure as (1 + r/n)ⁿ − 1.

No — this is a one-year yield-conversion tool. To project a balance over several years with regular contributions, use the compound interest calculator, which compounds the APY across multiple years.

APY itself is always expressed as an annual figure — it is the effective yield for one full year. The compounding frequency (daily, monthly, quarterly, etc.) is the input that drives the calculation, not the output period. Monthly compounding (n = 12) means interest is added twelve times a year; the resulting APY is still the annual yield. A 5% nominal rate compounded monthly produces a 5.12% APY for the year.

When you know the actual interest a deposit earned over a specific period, the Regulation DD formula gives you the realised APY: APY = 100 × [(1 + Interest ÷ Principal)^(365 ÷ Days in term) − 1]. For example, a $1,000 deposit that earned $61.68 in interest over 365 days has an APY of 100 × [(1 + 61.68/1000)^1 − 1] = 6.17%. This is mathematically equivalent to the (1 + r/n)ⁿ − 1 formula when the period is exactly one year.

APY benchmarks change with the interest rate environment, so there is no fixed answer. As a rule of thumb, a savings APY above the national average at the time — typically published by the FDIC or equivalent body — represents a competitive rate. High-yield savings accounts and online banks often pay several times the national average. Use the APY figure, not the nominal rate, to compare accounts fairly, since different compounding frequencies make nominal rates misleading.