APY Calculator
Use your own numbers after reviewing the formula and worked example.
Quick answer
Annual percentage yield measures effective one-year growth after accounting for compounding.
Formula or method
Keep units, percentages and time periods consistent. The formula is useful as a transparent check on the calculator result and helps explain why changing one input changes the answer.
Step-by-step
- Convert the annual nominal rate to decimal form.
- Choose compounding periods per year.
- Divide the rate by the number of periods.
- Compound for one year, subtract 1 and convert to percent.
Worked example
A 5% nominal rate compounded monthly produces an APY slightly above 5%.
How to interpret the result
APY is useful for comparing deposit rates with different compounding frequencies, but account fees and rate changes still matter.
When the answer is used for a purchase, loan, payroll decision, construction order, school grade, health estimate or other real-world choice, verify the assumptions that matter in that context. Accurate arithmetic still depends on accurate inputs.
Common mistakes
- Comparing APY with nominal APR.
- Forgetting to divide the rate by compounding frequency.
- Assuming a promotional APY lasts indefinitely.
Frequently asked questions
Can APY be higher than the nominal rate?
Yes, because of positive compounding.
Does APY include account fees?
Not necessarily.
Is APY commonly used for deposits?
Yes; it summarizes the effective annual yield.