APY Calculator
Convert any nominal interest rate (APR) to Annual Percentage Yield (APY) by selecting a compounding frequency. Compare how daily, monthly, quarterly, or annual compounding affects your effective yield.
Formulas, assumptions, and rounding are documented in our calculator methodology.
Annual Percentage Yield (APY)
5.1162%
from 5% APR compounded monthly
APY Calculation
- APY (Effective Annual Yield)
- 5.1162%
- APR (Nominal Rate Entered)
- 5%
- Compounding Periods per Year
- 12
- Your Deposit
- $10,000.00
- Interest Earned (1 year)
- $511.62
- Balance After 1 Year
- $10,511.62
Interest Earned in 1 Year at 5.1162% APY
| Deposit | Interest (1 yr) | Balance (1 yr) |
|---|---|---|
| $1,000.00 | $51.16 | $1,051.16 |
| $5,000.00 | $255.81 | $5,255.81 |
| $10,000.00 | $511.62 | $10,511.62 |
| $25,000.00 | $1,279.05 | $26,279.05 |
| $50,000.00 | $2,558.09 | $52,558.09 |
APY is calculated using the formula APY = (1 + APR/n)^n − 1, where n is the number of compounding periods per year. Assumes the rate remains constant for the full year. Actual yields depend on your financial institution's compounding practices and rate changes. This is for comparison and educational purposes only.
APY Formula and Calculation
APY = (1 + APR/n)^n − 1, where n is the number of compounding periods per year (365 for daily, 12 for monthly, 4 for quarterly, 2 for semi-annual, 1 for annual). Example: 5% APR compounded monthly → APY = (1 + 0.05/12)^12 − 1 = 5.1162%. This means $10,000 at 5% APR compounded monthly earns $511.62 in a year, not $500.
APY vs APR: What to Compare
Always compare APY when choosing between savings accounts, CDs, or money market accounts — it is the true effective yield. For loans, lenders quote APR (which includes fees). A savings account with 5% APR compounded daily has APY ≈ 5.127%. A savings account with 5% APR compounded monthly has APY ≈ 5.116%. The difference is small in practice — a better strategy is finding the highest APY regardless of compounding frequency.
Compounding Frequency Reference
Daily (365×): APY = (1 + r/365)^365 − 1. Monthly (12×): APY = (1 + r/12)^12 − 1. Quarterly (4×): APY = (1 + r/4)^4 − 1. Semi-annual (2×): APY = (1 + r/2)^2 − 1. Annual (1×): APY = APR (no difference when compounding once per year). Most online banks and credit unions compound daily or monthly — check your account agreement.
Frequently Asked Questions
- APR (Annual Percentage Rate) is the nominal interest rate — the stated rate before compounding is applied. APY (Annual Percentage Yield) is the effective annual rate that accounts for compounding. For example, a 5% APR compounded monthly has an APY of 5.116% — meaning you actually earn 5.116% on your money over a year, not 5%. The more frequently interest compounds, the higher the APY relative to the APR.
- APY = (1 + APR/n)^n − 1, where APR is the nominal annual interest rate (as a decimal) and n is the number of compounding periods per year. For daily compounding (n=365), a 5% APR gives APY = (1 + 0.05/365)^365 − 1 ≈ 5.1267%. For monthly compounding (n=12): APY = (1 + 0.05/12)^12 − 1 ≈ 5.1162%.
- Yes, but the difference becomes smaller as frequency increases. Going from annual to monthly compounding makes a meaningful difference. Going from monthly to daily adds very little extra yield. The jump from APR to APY is most significant at higher interest rates and less frequent compounding.
- Savings accounts, money market accounts, and CDs are required by law (Truth in Savings Act) to advertise APY — which reflects compounding and gives you the effective yield. Loans and credit cards are required to advertise APR. When comparing savings products, use APY for an apples-to-apples comparison regardless of compounding frequency.
- In 2024–2025, competitive high-yield savings accounts (HYSAs) and money market accounts offered APYs of 4–5%+. Traditional big-bank savings accounts often pay 0.01–0.5%. Rates change with the Federal Reserve's benchmark rate — compare current offerings from online banks and credit unions using today's advertised APY for an accurate comparison.