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APR (annual percentage rate) and APY (annual percentage yield) differ because APY accounts for compounding. APY is always higher and shows the true return on savings or cost of credit.
Formel
APY = (1 + APR/n)ⁿ - 1, where n is compounding frequency per year
Trin-for-trin guide
- 1Enter APR as a decimal
- 2Select compounding frequency (daily, monthly, quarterly, annual)
- 3Calculate APY using the formula
Løste eksempler
Input
APR = 5%, daily compounding
Resultat
APY ≈ 5.127%
(1 + 0.05/365)³⁶⁵ - 1
Almindelige fejl at undgå
- ✕Treating APR and APY as equivalent
- ✕Wrong compounding frequency
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