APR ↔ APY
Convert a nominal APR into the effective annual yield (APY) it produces once interest compounds. The more often it compounds, the more APY exceeds the stated APR.
Try it now
💡 Good to know: APY is always at least APR, because APY includes compounding — and the gap widens the more often interest compounds.
Worked example
APY: 6.167781%
How it’s solved
Worked on the example above, step by step — follow along and you can do it on paper next time, no tool required.
- APY is what a rate actually yields once it compounds n times a year — always a little above the stated APR.
- Rate per period = APR ÷ 100 ÷ periods
6 ÷ 100 ÷ 12 = 0.005 - Compound over the year: (1 + that)^periods
(1 + 0.005)^12 = 1.061678 - Subtract 1 and multiply by 100
(1.061678 − 1) × 100 = 6.167781%
Learn the method
Inputs
- APR %
6 - Compounds/yr
12
Frequently asked
What's the difference between APR and APY?
APR is the stated nominal rate; APY is what you actually earn or pay after compounding is applied over the year.
How is APY calculated?
APY = ((1 + APR ÷ 100 ÷ n)ⁿ − 1) × 100, where n is the number of compounding periods per year.