# Annual Percentage Yield

Annual Percentage Yield is a standardized illustration of annual interest rate in finance, depending on the compounding time of one year.

### Calculator of Annual Percentage Yield

### Formula of Annual Percentage Yield

**APY = (1 + r/n) ^{n} – 1 **

**Where,**

- APY = Annual Percentage Yield
- r = stated annual interest rate
- n = number of compounding periods per year

#### Example of Annual Percentage Yield

A man got loan from the bank with a 5% stated annual interest rate. The bank compounds the interest for 8 months. Calculate the annual percentage yield.

##### Given

Interest rate (r) = 5% = 0.05 Number of compounding periods (n) = 8

**To Find**

APY

**Solution:**

APY = (1 + r/n)^{n} – 1

= (1 + (0.05 / 8))^{8} – 1

= (1 + 0.00625)^{8} – 1

= 1.00625^{8} – 1

= 1.0511 – 1

= 0.0511

= 5.11 %

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