What is the difference between APR and APY?
APR (Annual Percentage Rate) is the simple annual interest rate without compounding. APY (Annual Percentage Yield) includes the effect of compound interest throughout the year.
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APY Calculator - Annual Percentage Yield | 1ClickTools
Calculate true Annual Percentage Yield (APY) from nominal interest rates (APR). Compare daily, monthly, and annual bank compounding.
About This Tool
When banks market savings accounts, certificates of deposit (CDs), or high-yield savings accounts (HYSAs), they quote APY (Annual Percentage Yield) to show how much your deposit will earn over one full year including compound interest. Nominal interest rates (APR) do not account for compounding during the year. For example, a 5.00% interest rate compounded daily results in a 5.13% APY. The more frequently interest is compounded (daily vs monthly vs annually), the higher the APY. The mathematical formula to calculate APY from nominal rate (r) and compounding periods (n) is APY = (1 + r/n)^n - 1. This calculator lets you instantly convert APR to APY or APY to APR across daily (365/yr), monthly (12/yr), quarterly (4/yr), or annual compounding.
Frequently Asked Questions
What is the formula to convert APR to APY?
The formula is 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.
Why is APY always higher than APR when compounding occurs?
Because earned interest is added to your principal balance during the year, subsequent interest calculations are performed on a larger balance.
What compounding frequency do high-yield savings accounts use?
Most high-yield online savings accounts (HYSAs) compound interest daily and credit it to your account monthly.
How does daily compounding affect a 5% interest rate?
A 5.00% nominal APR compounded daily (365 times/year) produces an effective APY of 5.127%.
What is APY on a Certificate of Deposit (CD)?
CD APY indicates the total annual interest you will receive if you leave your deposit untouched for the full term.
Does APY change if interest rates fluctuate?
For variable savings accounts, APY changes when the bank adjusts rates. For fixed CDs, APY remains locked for the term.
Can I use APY to compare different bank offers?
Yes! APY provides a standardized apples-to-apples comparison between banks regardless of their compounding frequencies.
Is this APY calculator free?
Yes, 1ClickTools APY Calculator is 100% free with no signups, ads, or usage caps.
Is any financial data uploaded when using this tool?
No. Calculations execute entirely in your local browser JavaScript memory.