What is an APY calculator?

This APY calculator is a handy tool which helps you solve for the actual interest you earn on a given investment over the course of a year. APY refers to annual interest yield and it’s a measurement which you can use to determine which is the most profitable deposit account you have or whether your investment will yield a good return.

How to calculate APY (annual percentage yield)?

To calculate your APY (Annual Percentage Yield), you need to know the interest rate and how often it is compounded within a year. First, convert the interest rate to a decimal by dividing it by 100. Next, add 1 to the interest rate. Then, raise the result to the power of the number of times the interest is compounded in a year.

What does APY mean?

APY is the annual percent yield that reflects compounding on interest. It reflects the actual interest rate you earn on an investment because it considers the interest you make on your interest. Consider the example above where the $100 investment yields 5% compounded quarterly.

How much interest does APY charge a year?

As APY takes into account the effect of the compounding factor, the yearly rate is expressed as 1.01¹² - 1 = 0.1268. So, according to APY, the bank is charging you 12.68 % interest yearly.