What is APY (Annual Percentage Yield)?
Under U.S. Regulation DD, the APY relates the interest a deposit would earn over its term to the principal, assuming principal and interest stay on deposit; savings accounts without a maturity use a 365-day term. For a 365-day term, APY = interest ÷ principal. Compare APY with APY.
Also called Annual Percentage Yield
APY (365-day term) = Interest ÷ Principal
Bank A (illustrative)
- Stated rate, credited monthly
- 4.20%
- Interest on $1,000 over 365 days
- $42.82
- APY
- 4.28%Compare with Bank B's 4.25% APY, not with 4.20%
A stated rate is not an APY
Compare APY with APY; a stated rate leaves out the effect of compounding.