Annual Percentage Yield (APY)

Annual Percentage Yield (APY) is the interest rate earned on an investment or deposit over one year, including the effects of compounding interest. APY is expressed as a percentage, allowing investors to measure the amount of money they will earn. A higher APY means the investor will earn more on their money over the course of a year. APY is commonly used to compare the profitability of different savings accounts, certificates of deposit (CDs), and other interest-bearing accounts. Understanding APY helps investors and savers make informed decisions about where to place their money to achieve the best returns. Financial products may offer interest rates that compound daily, quarterly, or biannually, resulting in the same nominal interest rate but different APYs.