What are APR and APY? How to convert them?

APR (Annual Percentage Rate) - APR is the annualized interest rate to calculate interest payments of a CD.

APY (Annual Percentage Yield) - APY is the real rate of return on a CD over one year, factoring in the effect of compound interest.

Convert APR to APY - We can use the following formula to convert APR to APY:

$\mathrm{APY}={(1+{\displaystyle \frac{\mathrm{APR}}{N}})}^N-1$
$N=\text{Number of compounding periods in a year}$

For example, a 5.0% APR compounding daily will generate a 5.1267% APY, assuming that a year has 365 days.

$\mathrm{APY}={(1+{\displaystyle \frac{\mathrm{5.0\%}}{\mathrm{365}}})}^{\mathrm{365}}-1=\mathrm{0.051267496467447}=\mathrm{5.1267\%}$

You can verify this calculation with our online APR to APY convertor by clicking the link: "What Is the APY for a PRE of 5.0% compounding daily".

Convert APY to APR - We can use the following formula to convert APR to APY:

$\mathrm{APR}=N\times ({(1+\mathrm{APY})}^{{\displaystyle \frac{1}{N}}}-1)$
$N=\text{Number of compounding periods in a year}$

For example, a 5.0% APY is equivalent to a 4.8793% APR compounded daily for a 365-day year.

$\mathrm{APR}=\mathrm{365}\times ({(1+\mathrm{5.0\%})}^{{\displaystyle \frac{1}{\mathrm{365}}}}-1)=\mathrm{0.048793425246426}=\mathrm{4.8793\%}$

You can verify this calculation with our online APY to APR convertor by clicking the link: "What Is the APR for an APY of 5.0% if compounded daily".

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