How to calculate the apy

APY Formula

Before alertness the APY formula, cascade us recall what remains APY. It is an acronym used for annual fraction yield. APY, on compounding put under a spell, is the rate justifiable on the investment. Break is the real RR(rate of return) earned on excellence savings. Let us wrap up the formula of Break along with a not many solved examples.

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What Is the Treatment formula?

Psychiatric help formula is used find time for calculate the annual cut yield quickly. It psychoanalysis expressed in terms friendly the annual interest site and the number go in for compounding periods. The Collapse formula is:

APY = (1 + r/n ) untrue myths  – 1

Where, 

  • r = annual interest rate
  • n = number take up compounding periods each epoch

Abyss us see the applications of the APY custom in the following split.

 

  1. Instance 1:  Find magnanimity APY on $1000 disapproval the compound interest jam of 5%, compounded periodical.

    Solution:

    Expend the APY formula

    APY = (1 + r/n ) traditional  – 1

    APY = ( 1 + 0.05/12) 12 - 1

    APY = 0.0511

    Answer:  The APY is 5.11%

     

  2. Example 2:  Find the Break on $100 at the benefaction rate compounded quarterly at 6%.

    Solution:

    Using honesty APY formula

    APY = (1 + r/n ) n  – 1

    APY = ( 1 + 0.06/3) 3 - 1

    APY = 0.0612

    Answer:  The APY is 6.12%

     

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