APY Calculator
Use this annual percent yield (APY) calculator to understand the potential returns of your investments over time.
Your APY Summary
Final Balance
$271,264.03
Total Interest Earned
$171,264.03
APY
5.116%
Balance Over Time
Your APY Results by Year
| Year | Balance ($) | Interest Earned ($) | Cumulative Interest ($) | APY (%) |
|---|---|---|---|---|
| 1 | $105,000 | $5,000 | $5,000 | 5.116% |
| 2 | $110,250 | $5,250 | $10,250 | 5.116% |
| 3 | $115,762.50 | $5,512.50 | $15,762.50 | 5.116% |
| 4 | $121,550.62 | $5,788.12 | $21,550.62 | 5.116% |
| 5 | $127,628.16 | $6,077.53 | $27,628.16 | 5.116% |
| 6 | $134,009.56 | $6,381.41 | $34,009.56 | 5.116% |
| 7 | $140,710.04 | $6,700.48 | $40,710.04 | 5.116% |
| 8 | $147,745.54 | $7,035.50 | $47,745.54 | 5.116% |
| 9 | $155,132.82 | $7,387.28 | $55,132.82 | 5.116% |
| 10 | $162,889.46 | $7,756.64 | $62,889.46 | 5.116% |
| 11 | $171,033.94 | $8,144.47 | $71,033.94 | 5.116% |
| 12 | $179,585.63 | $8,551.70 | $79,585.63 | 5.116% |
| 13 | $188,564.91 | $8,979.28 | $88,564.91 | 5.116% |
| 14 | $197,993.16 | $9,428.25 | $97,993.16 | 5.116% |
| 15 | $207,892.82 | $9,899.66 | $107,892.82 | 5.116% |
| 16 | $218,287.46 | $10,394.64 | $118,287.46 | 5.116% |
| 17 | $229,201.83 | $10,914.37 | $129,201.83 | 5.116% |
| 18 | $240,661.92 | $11,460.09 | $140,661.92 | 5.116% |
| 19 | $252,695.02 | $12,033.10 | $152,695.02 | 5.116% |
| 20 | $265,329.77 | $12,634.75 | $165,329.77 | 5.116% |
What is APY?
APY (Annual Percentage Yield) represents the real rate of return earned on an investment, taking into account the effect of compounding interest. It provides a standardized way to compare the annual returns of different investments that may compound at different frequencies.
How is APY Calculated?
The formula to calculate APY is:
\( APY = \left(1 + \frac{r}{n}\right)^n - 1 \)
Where:
- \( r \) = annual interest rate (APR)
- \( n \) = number of compounding periods per year
How to Use the APY Calculator
This APY calculator helps you estimate the potential returns of your investments over time. Below are detailed instructions on how to use the calculator, along with definitions for each metric and answers to frequently asked questions.
Follow these steps to use the calculator:
- Initial Balance: Enter the initial amount you plan to invest.
- Interest Rate (APR): Enter the annual interest rate.
- Compounding Frequency: Select the frequency of compounding (Daily, Weekly, Monthly, Quarterly, Annually).
- Term: Enter the number of days, weeks, months, or years you plan to keep your investment.
Frequently Asked Questions (FAQ)
1. What is the difference between APR and APY?
APR (Annual Percentage Rate) is the annual rate of interest without accounting for the effects of compounding. It is typically used for loans and credit products to represent the yearly cost of borrowing money.
APY (Annual Percentage Yield), on the other hand, includes the effects of compounding, providing a more accurate measure of the actual return on investment over a year. APY is commonly used for savings accounts, certificates of deposit (CDs), and other investment products.
In essence, while APR gives you the nominal interest rate, APY gives you the effective interest rate, which can be higher due to the impact of compounding.
For example, if you have a savings account with an APR of 5% that compounds monthly, the APY would be calculated as follows:
\( APY = \left(1 + \frac{0.05}{12}\right)^{12} - 1 \approx 0.0512 \) or 5.12%
This means your effective annual return is 5.12%, not just 5%, due to monthly compounding.
2. What is a good APY for a savings account?
A good APY for a savings account varies depending on economic conditions and market rates. Generally, an APY above the national average, which is around 0.05% as of 2024, is considered good. High-yield savings accounts can offer APYs ranging from 0.50% to 1.00% or more.
3. How do you calculate APY on a CD?
To calculate APY on a CD (Certificate of Deposit), use the APY formula:
\( APY = \left(1 + \frac{r}{n}\right)^n - 1 \)
Where \( r \) is the annual interest rate and \( n \) is the number of compounding periods per year. For example, if a CD has an APR of 3% and compounds quarterly (n=4), the APY is:
\( APY = \left(1 + \frac{0.03}{4}\right)^4 - 1 \approx 0.0304 \) or 3.04%
4. How to calculate APY monthly?
To calculate APY with monthly compounding, use the formula:
\( APY = \left(1 + \frac{r}{12}\right)^{12} - 1 \)
Where \( r \) is the annual interest rate. For example, if the APR is 6%, the APY with monthly compounding is:
\( APY = \left(1 + \frac{0.06}{12}\right)^{12} - 1 \approx 0.0617 \) or 6.17%
5. How to calculate APY compounded daily?
To calculate APY with daily compounding, use the formula:
\( APY = \left(1 + \frac{r}{365}\right)^{365} - 1 \)
Where \( r \) is the annual interest rate. For example, if the APR is 4%, the APY with daily compounding is:
\( APY = \left(1 + \frac{0.04}{365}\right)^{365} - 1 \approx 0.0408 \) or 4.08%
6. How to calculate APY on a savings account?
To calculate APY on a savings account, use the same formula:
\( APY = \left(1 + \frac{r}{n}\right)^n - 1 \)
Determine the annual interest rate (APR) and the compounding frequency (daily, monthly, etc.). For instance, if the APR is 2% and it compounds monthly:
\( APY = \left(1 + \frac{0.02}{12}\right)^{12} - 1 \approx 0.0202 \) or 2.02%
Disclaimer
This APY calculator provides estimates based on the inputs you provide and assumptions made in the calculation process. Please consider the following:
- These estimates do not guarantee future results and are for illustrative purposes only.
- The calculations assume constant rates of return and compounding, which may not reflect actual market conditions.
- Investment returns can vary and may be affected by factors such as market fluctuations, economic conditions, and changes in tax laws.
- The calculator does not account for transaction fees, account fees, or other costs that may impact your returns.
- Past performance of an investment is not indicative of future results.
- We strongly recommend consulting with a qualified financial advisor to assess your individual investment goals and risk tolerance.
By using this calculator, you acknowledge that the calculations are for informational purposes only and should not be construed as financial advice. Please consult with a financial advisor for personalized advice. See our full terms of service for more information.