APY formula
APY = (1 + r ÷ n)n − 1
Continuous compounding: APY = er − 1
r is the annual interest rate as a decimal and n is the number of times interest is added per year.
APR vs APY
APR is the simple yearly rate. APY includes "interest on interest". For savings, a higher APY means you earn more. For loans, lenders usually quote APR, which makes the cost look smaller than an APY-style figure would.
Example
A savings account paying 4.5% compounded monthly has an APY of about 4.594%. On a $10,000 deposit, that is about $459 in interest after a year, compared with $450 at simple interest.
Want to see growth over several years with monthly deposits? Use the high-yield savings calculator or the compound interest calculator.
Last reviewed October 2026.
Frequently asked questions
What is APY?
APY, or annual percentage yield, is the real return on savings over a year once compounding is included. Banks must show APY on savings accounts and CDs in the US, so you can compare accounts fairly.
How do I convert APR to APY?
APY = (1 + APR ÷ n)ⁿ − 1, where n is the number of compounding periods per year. A 4.5% rate compounded monthly gives (1 + 0.045 ÷ 12)¹² − 1 ≈ 4.59% APY.
Does daily compounding make a big difference?
Not much compared with monthly. At 4.5%, monthly compounding gives 4.594% APY and daily gives 4.602%. Compounding frequency matters less than the rate itself.
Can I convert APY back to the interest rate?
Yes. Choose "APY to APR" and enter the APY and compounding frequency. The calculator reverses the formula to find the nominal annual rate.
How much will I earn in a year?
Enter a deposit amount and the calculator multiplies it by the APY, showing the interest after one year with no further deposits or withdrawals.