Interest rate (APR), Compounding, Deposit (optional)
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How this calculator works
APY is what you actually earn in a year once compounding is included. A 5% rate compounded monthly yields about 5.12%. Banks in the United States must quote APY on deposit accounts so that offers with different compounding schedules can be compared directly.
Formula
- APY = (1 + r / n)^n − 1
- r = nominal annual rate, n = compounding periods per year
- Interest in one year = deposit × APY
Worked example
5% compounded monthly on 10,000
- Interest rate (APR)
- 5%
- Compounding
- Monthly
- Deposit (optional)
- 10,000
Result5.116% APY
5.00% compounded 12 times a year.
Things to keep in mind
- Figures are estimates for planning. They are not financial advice, and they ignore taxes and fees unless stated.
Frequently asked questions
What is the difference between APR and APY?
APR is the nominal yearly rate without compounding. APY includes compounding, so it is equal to or higher than APR. Lenders usually quote APR; banks quote APY on savings.
Does daily compounding make a big difference?
Only slightly. At 5%, monthly compounding gives 5.116% APY and daily compounding gives 5.127%.
Is APY the same as the interest rate?
Only when interest compounds once a year. With more frequent compounding APY is higher than the stated rate.
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Results are estimates based on the values you enter and the published method shown above. They do not replace professional medical, financial or legal advice. Method reviewed October 7, 2026. About this site