APY Calculator
Convert a nominal APR into the true annual percentage yield (APY) for any compounding frequency.
Banks quote a nominal APR, but what you actually earn in a year depends on how often interest compounds. Enter the nominal rate and compounding frequency to get the effective annual percentage yield (APY) — the FDIC-standard apples-to-apples rate — plus a concrete line showing what a $10,000 deposit grows to in one year.
How to use this calculator
- Step 1: Enter the nominal APR as a percentage (e.g. 4.25).
- Step 2: Pick the compounding frequency from the dropdown — Annually through Daily.
- Step 3: Hit Calculate to get the APY and see what a $10,000 deposit grows to in one year.
- Step 4: Compare APYs across offers — the higher APY earns more, regardless of the nominal rate.
The formula
APY = ((1 + r/n)^n − 1) × 100, where r is the nominal APR as a decimal and n is periods per year
Worked example
A 4.25% nominal rate compounded daily produces an APY of about 4.3413%, so a $10,000 deposit grows to roughly $10,434.13 in one year. The same 4.25% compounded monthly yields slightly less — about 4.3338% APY — which is exactly why APY, not APR, is the number to compare.
Frequently Asked Questions
What is APY?
APY — annual percentage yield — is the effective yearly rate once compounding is included, defined by the FDIC as ((1 + r/n)^n − 1) × 100. It is the only fair way to compare accounts, because two accounts with the same nominal APR can pay different amounts if one compounds daily and the other monthly. By law, US banks must disclose APY on deposit accounts.
What is the difference between APR and APY?
APR is the nominal rate before compounding; APY is what you actually earn (or owe) over a year after compounding. On savings accounts APY is always equal to or higher than the APR. The more frequently interest compounds — daily beats monthly, monthly beats annually — the bigger the gap between the two.
Does compounding frequency really matter?
It matters modestly but measurably. A 5% nominal rate compounded monthly yields an APY of about 5.1162%, while daily compounding pushes it to about 5.1267%. On a $10,000 deposit that is roughly a $1 difference per year — small, but it is exactly the difference APY captures, and it grows with larger balances.
Which compounding frequency should I choose?
Match what your bank actually does — it is stated in the account terms, and daily compounding is the most common for US savings accounts. If you are comparing offers, run each one’s real frequency through the calculator so the comparison is honest. When in doubt, the higher APY wins for savings (and the lower APR wins for borrowing).
Can APY be lower than the APR?
On deposit accounts, no — APY is never below the nominal APR when rates are positive. On credit products, fees and timing can make the effective cost differ from the stated APR, which is why borrowers should compare APRs while savers should compare APYs.