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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.
Formule
APY = (1 + APR/n)ⁿ - 1, where n is compounding frequency per year
Guide étape par étape
- 1Enter APR as a decimal
- 2Select compounding frequency (daily, monthly, quarterly, annual)
- 3Calculate APY using the formula
Exemples résolus
Entrée
APR = 5%, daily compounding
Résultat
APY ≈ 5.127%
(1 + 0.05/365)³⁶⁵ - 1
Erreurs courantes à éviter
- ✕Treating APR and APY as equivalent
- ✕Wrong compounding frequency
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