What Is APY (Annual Percentage Yield)? Meaning & Example
Definition
APY is the yearly return on savings including the effect of compounding. It is useful for comparing savings accounts and CDs.
Related terms
APR is the yearly cost of borrowing, including interest and certain fees, shown as a percentage. It helps compare loans and credit cards.
Compound InterestCompound interest is interest earned on both your original money and the interest already added to it. Over long periods it can make savings grow much faster than simple interest.
High-Yield Savings AccountA high-yield savings account pays a higher interest rate than a typical savings account, often from online banks. It is a popular home for emergency funds.
What is APY (Annual Percentage Yield)?
APY is the yearly return on savings including the effect of compounding. It is useful for comparing savings accounts and CDs.
Can you give an example of APY (Annual Percentage Yield)?
An account with a 4.00% rate compounded monthly has an APY of about 4.07%.