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APY (annual percentage yield)

Definition

The effective yearly return on savings once compounding is included. It's the fairest way to compare savings accounts.

Formula

APY = (1 + r/n)^n − 1, where r is the stated annual rate and n the number of compounding periods per year.

Example

A 4.00% rate compounded daily works out to an APY of about 4.08%.

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General educational information, not personal financial advice. See our disclaimer.

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