APR to APY Calculator
Convert Annual Percentage Rate (APR) to Annual Percentage Yield (APY)
Annual Percentage Yield (APY)
0.00%
Based on 12x per year compounding
Formula Used
APY = (1 + APR/n)^n - 1
where n = compounding frequency per year
Understanding APR vs APY
APR (Annual Percentage Rate)
- Simple interest rate for one year
- Does not account for compounding
- Required disclosure for loans
- Used for mortgage rates
Common Use Cases
When to Use APY
- Comparing savings accounts
- Evaluating investment returns
- Understanding compound interest
- Calculating effective yields
Frequently Asked Questions
Why is APY higher than APR?
APY is higher because it accounts for compound interest, where you earn interest on previously earned interest.
Which should I use for comparison?
Use APY when comparing savings products and APR when comparing loan products.
How often does compounding occur?
Compounding frequency varies by financial product - from daily to annually. More frequent compounding results in a higher APY.
What affects the difference between APR and APY?
The compounding frequency and interest rate level affect the difference. Higher rates and more frequent compounding create larger differences.