An APY calculator converts between APR (the nominal rate banks quote) and APY (the effective yearly rate after compounding), in either direction. Pick the direction, enter the rate, set the compounding frequency, and read the converted rate from the readout.
How to use it
- Choose the direction: APR to APY, or APY to APR.
- Enter the rate exactly as quoted, as a percentage.
- Set the compounding frequency the account or loan uses.
- Read the converted rate. The per-period rate is shown too, for checking.
The formulas
APY → APR: APR = n × ((1 + APY)(1/n) − 1)
n = compounding periods per year.
Worked example
APY = (1 + 0.0425/12)12 − 1 = 4.334%
Compounding adds about a tenth of a point over the quoted rate.
Frequently asked questions
What is APY?
Annual Percentage Yield. It is the effective yearly rate you actually earn (or pay) after compounding is included.
What is APR?
Annual Percentage Rate. It is the nominal yearly rate before compounding. Loans usually quote APR; savings accounts usually quote APY.
Why is APY higher than APR?
Because interest itself earns interest when compounded. The more frequent the compounding, the bigger the gap between the two.
Which compounding frequency is best for savers?
More frequent is better for savers: daily beats monthly, monthly beats annually, at the same nominal rate. For borrowers it is the reverse.