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
= 1.00625⁸ - 1
= 1.0511 - 1
= 0.0511
= 5.11 %