Calculate Annual Percentage Yield (APY) from nominal interest rate and compounding frequency. Compare savings growth across compounding periods.
Annual Percentage Yield (APY) represents the real rate of return you earn on savings or investments when compounding is taken into account. Unlike the nominal interest rate, APY shows exactly how much your money grows in a year, including the effect of interest earning interest — the power of compounding.
Banks advertise APY on savings accounts and CDs because it is always higher than the nominal rate (assuming compounding happens more than once per year). The more frequently interest compounds, the higher the APY. Daily compounding yields slightly more than monthly, which yields more than quarterly, and so on.
This calculator converts any nominal rate into APY based on your chosen compounding frequency. It also projects your savings growth over time, including regular monthly additions. Use the comparison table to see exactly how much difference compounding frequency makes — and understand why APY is the number that truly matters for your savings.
When comparing savings accounts, CDs, or money market funds, APY is the cleanest way to compare yield because it includes compounding. This calculator shows how much extra return comes from compounding frequency, so you can compare offers with the same nominal rate on an equal basis.
APY = (1 + r/n)^n − 1, where r = nominal annual rate (decimal), n = compounding periods per year. For continuous compounding: APY = e^r − 1.
Result: APY: 5.1162% — $10,000 grows to $26,491 in 5 years with $200/mo additions
A 5.0% nominal rate compounded monthly produces an APY of 5.1162% — the extra 0.1162% comes entirely from compounding. With $10,000 initial and $200/month over 5 years, total deposits are $22,000 and total interest earned is approximately $4,491.
APY converts a stated interest rate into the actual annual yield after compounding. That makes it the right comparison tool for deposit accounts and other savings products where interest is credited back into the balance.
The more often interest is added to the account, the sooner it starts earning its own interest. Daily compounding produces a slightly higher return than monthly or quarterly compounding, though the difference is usually small at everyday savings rates.
Use APY to compare accounts with different compounding schedules, but still check the underlying rate, minimum balance rules, fees, and withdrawal restrictions. A slightly higher APY is only valuable if the account terms also fit how you plan to use the money.
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This page converts the entered nominal annual rate into an annual percentage yield using the selected compounding frequency, then projects growth by adding the initial deposit and monthly contributions period by period before crediting interest for that period. It also shows a comparison table so the user can see how the same nominal rate translates into different effective yields at annual, semiannual, quarterly, monthly, daily, and continuous compounding.
It is a planning worksheet rather than a bank disclosure statement. Actual account earnings can differ because institutions may quote only APY, apply balance tiers, charge fees, require minimum balances, or limit withdrawals, while this page assumes a constant nominal rate and uninterrupted reinvestment.
APY (Annual Percentage Yield) reflects earnings with compounding — used for savings and investments. APR (Annual Percentage Rate) reflects borrowing costs including fees — used for loans. APY will always be ≥ the nominal rate; APR will always be ≥ the interest rate.
More frequent compounding means interest is calculated on a shorter period and added to the balance sooner, where it begins earning interest itself. Daily compounding yields slightly more than monthly, which yields more than quarterly or annually.
Yes, assuming all other terms are equal. A higher APY means more interest earned. However, consider withdrawal restrictions, FDIC insurance limits, minimum balance requirements, and account fees when comparing options.
Continuous compounding is the theoretical limit where interest compounds infinitely often. The formula is APY = e^r − 1. In practice, daily compounding is very close to continuous compounding and the difference is negligible for most rates.
No. APY only reflects the interest rate and compounding frequency. Account fees, maintenance charges, or penalties for early withdrawal are not included. Always check the full fee schedule alongside the APY.
At 5% for 1 year: annual compounding yields $500; monthly yields $511.62; daily yields $512.67. The difference is modest for one year but compounds significantly over longer periods. Over 20 years, the gap widens to hundreds or thousands of dollars.