Why is APY higher than the stated rate?

APY reflects the effect of compounding — earning interest on interest — so it’s always equal to or higher than the nominal rate, with the gap growing at higher rates and more frequent compounding.

APY Calculator

Banking & Interest

Convert a nominal interest rate into its Annual Percentage Yield (APY) based on compounding frequency.

Display currency

Changing the display currency only changes the symbol shown — amounts aren't converted, since this tool doesn't use live exchange rates.

Nominal (stated) annual interest rate (%)

Compounding frequency

APY (Annual Percentage Yield)

How this is calculated

APY = (1 + r/n)ⁿ − 1, where r is the nominal annual rate and n is the number of compounding periods per year. This is the actual annual return you earn once compounding is accounted for.

Frequently asked questions

Why is APY higher than the stated rate?: APY reflects the effect of compounding — earning interest on interest — so it’s always equal to or higher than the nominal rate, with the gap growing at higher rates and more frequent compounding.

Effective Interest Rate Calculator

Calculate the true effective annual rate of a loan once compounding frequency is factored in.

CD Calculator

Calculate the maturity value of a Certificate of Deposit (CD).

Savings Calculator

Project your savings account balance from an initial deposit and recurring monthly deposits.