# Annual percentage yield

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## Annual percentage yield (APY)

The effective, or true annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the effect of compounding. The APY is calculated by taking one plus the periodic rate, raising it to the number of periods in a year and then subtracting one. For example, a 1% per month rate has an APY of 12.68% (1.01^12 -1).

## Annual Percentage Yield

The yield on an investment in one year, taking into account the effects of compounding. For example, if one has a fixed-income investment such as certificate of deposit that pays 3% in interest each month, the annual percentage yield is more than 3% because compounding the interest results in a (slightly) higher return each month. In this example, the annual effective yield is calculated thus:

Annual percentage yield = (1.03)^12 - 1 = .43 = 43%, where 1.03 is 1 plus the monthly interest and 12 is the number of times in a year interest is compounded. It is also known as the annual effective yield.

## Annual percentage yield (APY).

Annual percentage yield is the amount you earn on an interest-bearing investment in a year, expressed as a percentage. For example, if you earn \$60 on a \$1,000 certificate of deposit (CD) between January 1 and December 31, your APY is 6%.

When the APY is the same as the interest rate that is being paid on an investment, you are earning simple interest. But when the APY is higher than the interest rate, the interest is being compounded, which means you are earning interest on your accumulating interest.

References in periodicals archive ?
However, we think in 2013, the relatively small number of additional destinations - mostly long-haul, where prices generally allow better margins - can help keep effective yields flat and support profitability.
The TGA2575-TS and all die-on-tab products are inspected in the factory for thorough quality assurance and higher effective yields.
The company plans to offer effective yields of 13 percent for the two-year paper, 13.
6 percent coupon, with effective yields ranging from 12.
aims to raise the effective yields promised to holders of its group annuity insurance policies by 0.
Any writedown would establish a new cost, which then would be used to calculate effective yields in subsequent periods.
Aqua)--has successfully completed arrangements for \$72 million in first mortgage bonds issued through the Delaware County Industrial Development Authority at effective yields of 4.
Nippon Life to hike pledged group annuity policy effective yields
The above two actions are the first steps taken by Coleville's directors to achieve the company's requirement for additional expertise necessary to meet the specific management and directional needs, prerequisite for it attaining the maximum effective yields of it's various opportunities in both Venezuela and Indonesia.
These factors were partially offset by lower effective yields due to an increase in the percentage of direct loans within the Company's portfolio of receivables held for investment.
The decline in net interest spreads reflects lower effective yields on the Company's receivables portfolio and a higher cost of debt.
These improvements offset the decline in net interest income due to a decline in effective yields and an increase in the cost of funds, lower servicing income and higher operating costs associated with the growth in new loan origination volume.

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