APY Calculator

Use our free APY (Annual Percentage Yield) calculator to convert a nominal interest rate (APR) to an effective annual yield. APY accounts for compounding and shows the true annual return on your savings.

Financial

Nominal Interest Rate (APR) (%)

Compounding Frequency

Principal Amount (optional)

Currency

Formula

APY represents the real rate of return on your savings, taking into account the effect of compounding interest. Unlike APR which is the nominal rate, APY shows what you actually earn in a year.

APY = (1 + r/n)^n - 1

Percentage: The percentage value you want to apply

Number: The original number or value

Result: The calculated result

How It Works

1Enter the nominal interest rate (APR) offered by the bank.
2Select how often interest is compounded.
3Optionally enter a principal amount to see the dollar return.
4The calculator shows the APY and the effective annual return.

Examples

5% APR compounded monthly

1.APY = (1 + 0.05/12)^12 - 1
2.APY = (1.004167)^12 - 1
3.APY = 0.05116 = 5.116%

Result: 5.116%

Frequently Asked Questions

Annual Percentage Yield (APY) is the effective annual rate of return accounting for compounding. It is higher than the nominal APR when compounding occurs more than once per year.

APR is the nominal annual rate before compounding. APY includes the effect of compounding, making it the true rate of return. For monthly compounding at 5% APR, APY = 5.116%.

Banks advertise APY because it is a higher number than APR and more accurately represents what you will earn in a year.

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APY vs APR Explained

CalculateMe Team

Last updated: 2026-07-15

Frequently Asked Questions

Annual Percentage Yield (APY) is the effective annual rate of return accounting for compounding. It is higher than the nominal APR when compounding occurs more than once per year.

APR is the nominal annual rate before compounding. APY includes the effect of compounding, making it the true rate of return. For monthly compounding at 5% APR, APY = 5.116%.

Banks advertise APY because it is a higher number than APR and more accurately represents what you will earn in a year.

APY Calculator

Formula

How It Works

Examples

5% APR compounded monthly

Frequently Asked Questions

What is APY?

How is APY different from APR?

Why do banks advertise APY?

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APY Calculator

Formula

How It Works

Examples

5% APR compounded monthly

Frequently Asked Questions

What is APY?

How is APY different from APR?

Why do banks advertise APY?

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