Annual Percentage Yield

APY stands for annual percentage yield, otherwise called effective annual rate (EAR). This measurement is used to estimate the potential gain from an investment or the final balance in a deposit account. In order to make smart financial decisions, you have to remember that the final balance depends on a range of aspects. You have to take into consideration not only the interest rate but also the period of time you are going to invest your money and the kind of interest (whether it's simple or compound).

With annual percentage yield, you can compare a number of interest rates that have different compounding periods. This is because APY is a measurement similar to compound interest but expressed in percentages. While you can always use the compound interest calculator in order to check the final balance of your investment, the APY calculator will estimate its annual percentage gain.

Remember that APY is not the same as APR. The latter stands for annual percentage rate and is normally associated with loans and mortgages. Provided you don't invest money but borrow it, the formula is quite similar. In order to help you decide which loan offer is the most beneficial, you can use our mortgage calculator. This tool helps you estimate the amount of money you'll have to pay back.

This APY calculator bases its calculations on two values - interest and compound frequency. Thanks to the variety of options in the second box, you can compare a number of offers that have different compounding periods.

For example, you have the following offers:

Now, the only thing you have to remember is that the higher the APY value is, the better the offer. By calculating APY, you can see that the first of the exemplary offers pay the most.