Annual percentage yield

Also found in: Acronyms, Wikipedia.

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).
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
And as long as it continues to have a balance of $6, it bears a 2.02 percent annual percentage yield.
The event, which ran across all of its 34 branches, brought in people with its 10.00% annual percentage yield for three-month certificates, one percentage point off auto and personal loans and a free $25 Service CU gift card when a member took out an instantly issued Visa credit card.
If the balance in your checking account is always above minimum required, consider a checking account with a good annual percentage yield (APY).
22 was with GMAC Bank of Midvale, Utah, paying a 4.35 annual percentage yield.
736 would require the disclosure of an "effective percentage yield" on accounts with maturities of less than one year besides the annual percentage yield" (APY) that must be disclosed for all accounts.
Your annual percentage yield, or APY -- the money your money earns -- will increase from 0.09 percent (the national average at traditional banks) to over 2 percent.
He is currently looking at putting $100,000 in a five-year CD that provides an annual percentage yield of 1 percent, but he was hoping for a higher return.
As discussed in an earlier column, this can be assessed most effectively by looking at the "Annual Percentage Yield", which will make it easier to compare different rates if they are calculated at different frequencies.
The product is called "Provident Smart Checking." This spring, the bank was offering 5.01 percent annual percentage yield (APY) on account balances up to $25,000, and 2.0 percent APY on that portion of their balances over $25,000.
Specifically, the bank offered a $1,000 minimum new money CD with an annual percentage yield of 4.8 percent--with a twist.
College Savings Bank has been ranked as #1 in FDIC-insured 529 college savings plans based on Annual Percentage Yield (APY) net of fees for Certificates of Deposit products (1-, 2-, and 3-year maturity), the company said.
If the available accounts pay interest, ask for the "annual percentage yield", which will make it easier to compare different rates if they are calculated at different frequencies.

Full browser ?