Annual Percentage Yield (Apy)
| Annual Percentage Yield (APY) is the rate of return on investment that takes into account the effects of compounding interest. This makes it different from the Annual Percentage Rate (APR), which only looks at simple interest. Compounding interest is when interest is earned not only on the original investment, but also on the accumulated interest from previous periods. This means that the longer the investment is held, the greater the return will be. The APY takes this into account, and so is a more accurate measure of return than the APR. Investors should be aware of the difference between the APY and the APR when considering an investment. The APY will always be higher than the APR, because it includes the effects of compounding interest. However, the APY is a more accurate measure of the true return on investment, and so is the better figure to use when comparing investment options. |
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