Free APY Calculator: Maximize Your Savings with Annual Percentage Yield
Enter any nominal rate and compounding frequency to see the true annual return your money earns (APY). The formula $$text{APY}=(1+ rac{r}{n})^{n}-1$$ shows why daily compounding at 5 % boosts the yield to 5.13 % (FDIC, 2024). Use the result to compare accounts quickly.
Annual Percentage Yield (APY) Calculator
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How to use the tool
Enter the stated annual interest rate (%) Example A: 2.75 Example B: 6.10
Select how many times the interest compounds per year Example A: 12 (monthly) Example B: 365 (daily)
Press “Calculate” to display the effective Annual Percentage Yield.
Formula used
$$\text{APY}= \left(1+\ rac{r}{n}\right)^{n}-1$$ where r is the nominal annual rate (decimal) and n is the compounding frequency.
APY is the yearly rate of return that includes compound interest, making different accounts directly comparable (CFPB, n.d.).
How do you calculate APY?
Divide the nominal rate by compounding periods, add one, raise to the same power, then subtract one—see the formula above (FDIC, 2024).
Why is APY higher than the nominal rate?
Compounding earns interest on interest; each period adds a small gain that raises the total annual return (SEC, 2023).
Does compounding frequency matter?
Yes. Daily compounding at 5 % yields 5.13 %, while annual compounding stays at 5 % (Calculator example; FDIC, 2024).
How is APY different from APR?
APR ignores compounding; APY includes it, showing the effective yield (CFPB, n.d.).
Can I compare CDs and savings accounts with APY?
Yes. APY standardises returns across products, regardless of term or compounding schedule (FDIC, 2024).
Is a higher APY always better?
Higher APY increases earnings but also review fees, withdrawal limits, and insurance coverage (FDIC Deposit Insurance FAQ, 2023).
How does this calculator aid long-term planning?
It reveals the compounding boost each year, letting you project multi-year growth accurately for goals like retirement (SEC, 2023).
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