Savings & Growth Tools
APY / Effective Yield Calculator
Turn a nominal interest rate and compounding frequency into the effective annual yield you actually earn.
Enter a nominal annual interest rate and how often it compounds to see the resulting APY (Annual Percentage Yield), plus an illustrative one-year ending value if you enter a starting balance.
Direct Answer
APY (Annual Percentage Yield) is the effective annual rate an account actually earns once compounding is factored in: APY = (1 + nominal rate ÷ compounding periods per year)^(compounding periods per year) − 1. It is always equal to or greater than the stated nominal rate, and it lets you compare two accounts with different compounding schedules on an apples-to-apples basis.
This calculator is an illustrative, single-year projection: it assumes a constant nominal rate held for exactly one year with no withdrawals or additional deposits. It is not a forecast or a recommendation.
APY Calculator
Results are illustrative estimates based on the numbers you enter, assuming a constant rate held for one year with no withdrawals. Not investment advice, a forecast, or a recommendation. All calculation happens locally in your browser; nothing is sent to a server.
Results
APY (Effective Annual Yield)
N/A
(1 + nominal rate ÷ n)n − 1
Results assume the nominal rate stays constant for the full year with no withdrawals or additional deposits. They don't account for rate changes, taxes, fees, or account minimums. Use them as a planning baseline, not a guarantee.
Methodology
The calculator applies the formula below directly to your inputs:
Illustrative ending value = Principal × (1 + APY)
Illustrative interest earned = Illustrative ending value − Principal
- Nominal rate is the stated annual rate before compounding, entered as a percentage (e.g. 5 for 5%).
- n is the number of compounding periods per year (1 for annual, 12 for monthly, 365 for daily, and so on).
- APY is always equal to or greater than the nominal rate for any compounding frequency greater than one, because interest starts earning interest on itself within the year.
- As compounding frequency increases without bound, APY approaches the continuous-compounding limit, erate − 1, but the gain from compounding more often than daily is small in practice.
Assumptions and limitations
- Assumes the nominal rate is held constant for exactly one year. Real deposit account rates, especially on high-yield savings accounts and money market accounts, can change at any time.
- Assumes no withdrawals and no additional deposits during the year beyond the starting balance you enter.
- Does not account for taxes on interest income, account fees, or minimum-balance requirements.
- Not a forecast, a guarantee, or a recommendation to open any specific account.
- All calculation happens locally in your browser using the inputs on the page; nothing is fetched from or sent to a server.
FAQ
What is APY?
APY (Annual Percentage Yield) is the effective annual rate an account actually earns once compounding is accounted for. APY = (1 + nominal rate ÷ compounding periods per year)^(compounding periods per year) − 1. It is always equal to or greater than the nominal rate, because it captures interest earned on interest already credited during the year.
Why is APY higher than the nominal interest rate?
The nominal rate is the stated annual rate before compounding. APY reflects what actually accrues once interest starts earning interest on itself within the year. The more frequently interest compounds (monthly or daily versus annually), the larger the gap between the nominal rate and APY, though the effect shrinks at very high compounding frequencies as it approaches the continuous-compounding limit.
Does compounding frequency matter for APY?
Yes. A higher compounding frequency (daily versus monthly versus annually) produces a higher APY for the same nominal rate, because interest is credited and starts compounding sooner. Annual compounding is the one case where APY exactly equals the nominal rate, since there's only a single compounding period.
Is this calculator's output a guaranteed return?
No. This calculator produces an illustrative, single-year projection that assumes the nominal rate stays constant for the full year and that no withdrawals or additional deposits occur. Real deposit accounts can change their rate at any time, and actual returns will differ if the rate changes or the balance moves. It is not a forecast or a recommendation.