APY Calculator
Find the true annual percentage yield of a rate once compounding is counted, and project how a savings deposit grows.
| Year | Balance | Interest earned |
|---|---|---|
| 1 | $10,512 | $512 |
| 2 | $11,049 | $1,049 |
| 3 | $11,615 | $1,615 |
| 4 | $12,209 | $2,209 |
| 5 | $12,834 | $2,834 |
How it's calculated
The rate a bank quotes is often the nominal rate, or APR. What you actually earn is the annual percentage yield, or APY, which counts the interest your interest earns during the year. APY is always a little higher than the nominal rate, and the more often the account compounds, the higher it gets.
At a 5 percent nominal rate compounded monthly, the APY works out to about 5.12 percent, a touch above the stated 5 percent. A $10,000 deposit left alone for five years grows to about $12,834, having earned around $2,834 in interest. That is the power of compounding on a safe, boring savings balance.
Compounding frequency matters, but only a little. At 5 percent, annual compounding gives a 5.00 percent APY, monthly gives 5.12 percent, and daily gives about 5.13 percent. The rate itself matters far more than how often it compounds, so shop on the APY a bank advertises rather than the compounding schedule.
Assumptions
- APY is (1 plus rate divided by n) to the power n, minus 1, where n is the number of compounding periods a year. The balance compounds at that frequency with no additional deposits.
- For regular monthly deposits on top of a starting balance, use the Compound Interest calculator instead.
Last updated: 2026-08-08
These assumptions follow our general methodology.
Frequently asked questions
What is the difference between APR and APY?
APR is the stated nominal rate. APY is what you actually earn once compounding is counted, so it is a little higher. A 5 percent APR compounded monthly is a 5.12 percent APY. Banks advertise APY on savings because it is the real yield.
Does compounding frequency matter much?
Only a little. More frequent compounding raises the APY, but the effect is small. At 5 percent, annual compounding gives a 5.00 percent APY, monthly gives 5.12 percent, and daily gives about 5.13 percent. The rate matters far more than the schedule.
What is a good APY for a savings account?
It moves with interest rates. High-yield savings accounts usually pay far more than big-bank accounts, which often pay almost nothing. Compare the APY, not the APR, since that is the figure you actually earn.
Is APY the same as the interest rate?
Not exactly. The interest rate, or APR, is the base nominal rate. APY folds in the effect of compounding over the year, so APY is the number that tells you your true annual return.