APR to APY Calculator
Convert APR (Annual Percentage Rate) to APY (Annual Percentage Yield) based on compounding frequency.
How to use this tool
- Enter apr and compounding frequency in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your apy and the full breakdown beneath it.
Convert APR to APY to understand your true annual return. APY accounts for compounding, giving a more accurate picture of what you earn or owe.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
APY = ( (1 + APR / n)n − 1 ) × 100
Where n is the number of compounding periods per year and APR is expressed as a decimal (e.g. 6% → 0.06).
How it works
This calculator converts a stated Annual Percentage Rate into an Annual Percentage Yield by accounting for within-year compounding. When interest is compounded more frequently than once per year, the effective yield exceeds the nominal rate — APY captures this. The formula assumes a constant rate and that compounding occurs exactly n times per year; it does not account for fees, which can make the real cost of credit higher than the stated APR.
Worked example
- APR = 0%, compounding frequency = 12 (monthly).
- r = 0 ÷ 100 = 0.
- APY = ((1 + 0/12)^12 − 1) × 100 = (1^12 − 1) × 100 = 0%.
APY: 0%
Common mistakes to avoid
- Entering APR as a whole number (e.g., 6) expecting a decimal -- the formula uses the decimal form, so the calculator handles the conversion; entering 0.06 instead of 6 produces a near-zero APY.
- Selecting annual compounding (n=1) for a savings account that compounds daily (n=365), understating the true APY by several basis points.
- Confusing APR with APY on a product disclosure and entering the APY as input, then over-comparing to another product's APR.
Key terms
- APR (Annual Percentage Rate)
- The nominal yearly interest rate on a loan or investment, stated before the effect of compounding is applied.
- APY (Annual Percentage Yield)
- The effective annual rate that accounts for compounding within the year; always ≥ APR for positive rates.
- Compounding frequency (n)
- How many times per year interest is calculated and added to the principal — common values are 12 (monthly), 4 (quarterly), or 365 (daily).
- Nominal rate
- The stated interest rate before the effect of compounding; equivalent to APR in this context.
- Effective rate
- The true annual return after compounding is applied; equivalent to APY in this context.
Frequently asked questions
- What is the difference between APR and APY?
- APR (Annual Percentage Rate) is the simple annual rate. APY (Annual Percentage Yield) accounts for compounding within the year, so it's always greater than or equal to APR. The more frequently interest compounds, the larger the gap.
- Why does compounding frequency matter?
- More frequent compounding means interest earns interest sooner. Daily compounding produces a higher APY than monthly compounding for the same APR.