Annual percentage yield (APY),
Definition of Annual percentage yield (APY):
Unlike simple interest, compounding interest is calculated periodically and the amount is immediately added to the balance. With each period going forward, the account balance gets a little bigger, so the interest paid on the balance gets bigger as well.
The annual percentage yield (APY) is the real rate of return earned on a savings deposit or investment taking into account the effect of compounding interest.
Standardized method for quoting compounded interest earned on a deposit account or investment. In computing APY, it is assumed the funds will remain on fixed deposit or invested for a full 365-day period.
How to use Annual percentage yield (APY) in a sentence?
- The more often interest is compounded, the better the return will be.
- APY is the actual rate of return that will be earned in one year if the interest is compounded.
- Compound interest is added periodically to the total invested, increasing the balance. That means each interest payment will be larger, based on the higher balance.
Meaning of Annual percentage yield (APY) & Annual percentage yield (APY) Definition