APR to APY Calculator

APR
%
Compounding
Enter a rate greater than 0 to Calculate

What is APR?

APR

APR represents the annualized interest rate charged on a loan or credit card, including any fees or additional costs as applicable to that card holder agreement. It considers only the interest rate without accounting for compounding or other factors. You will commonly see this type of interest rate used in loans, mortgages, credit cards, HELOC, etc.

APR Example-
  • If you have a credit card with an APR of 16%, you’ll pay 16% interest annually on your outstanding balance.

What is APY

APY

APY reflects the actual annual return on an investment or savings account, considering compounding. APY accounts for interest compounding (e.g., monthly, quarterly, daily) and any fees and is commonly used for savings accounts, certificates of deposit (CDs), and investments.

APY Example-
  • You invest $10,000 in an account with an APY of 4.25%. If the interest compounds monthly, your actual annual return will be slightly higher than 4.25% due to compounding.

Convert APR to APY

How to Convert APR to APY-

APR stands for Annual Percentage Rate, which is the annual interest rate charged on a loan or credit card this can be used to calculate the Annual Percentage Yield or APY. APY is the annual rate of return on an investment that takes into account the effect of compounding interest. To convert APR to APY, the following formula is used:

APY = [1 + (APR / Number of Periods)]^{Number of Periods} - 1

Here, the “Number of Periods” is equal to the number of times the interest is compounded in a year. For example, if the interest is compounded monthly, then `Number of Periods` would be 12, weekly would be 52 and so on.

What is APY and How is it Calculated?
APY stands for Annual Percentage Yield, which takes into account compounding interest. To calculate APY using a known APR, you can follow these steps:
  1. Divide APR by the number of compounding periods to get the periodic rate (i.e., monthly, 12).
  2. Add 1 to the periodic rate.
  3. Raise the result to the power of the number of compounding periods (i.e., monthly, 12).
  4. Subtract 1 from the result.
For example, let's say you have a savings account with an APR of 6% that compounds monthly. To calculate the APY, you would divide 6 by 12 to get a periodic rate of 0.5. Adding 1 to this gives 1.5. Raising this to the power of 12 (the number of compounding periods) gives 1.061678. Subtracting 1 from this gives an APY of 6.1678%. With a APY of 6.1678%, in 1 Year $1000 would be equal to $1061.678 with compounded interest.