## Answers the Question

What is the interest rate, if yearly compounding is included?

## Calculator for Annual Percentage Yield

## What Is the Annual Percentage Yield?

There are many systems for calculating interest, put the annual percentage yield is quite popular because, quite frankly, it allows institutions to show higher numbers than they could via simple interest. That's because the benefits of compounding are included into the number.

The higher the number of compounding periods, the larger the APY will be, relative to simple interest.

Also abbreviated as APY

## Why Is it Important?

- Without knowing how much of a return on investment will be received, few would bother to invest in an asset.

## Formula(s) to Calculate Annual Percentage Yield

- ANNUAL PERCENTAGE YIELD = ((1 + INTEREST RATE / NUMBER OF COMPOUNDING PERIODS ) ^ NUMBER OF YEARS) - 1

## Common Mistakes

- Confusing APY with simple interest.