Finance

APR to APY Calculator

Convert a nominal annual percentage rate into an effective annual yield using a chosen compounding frequency.

Last reviewed: April 30, 2026Free toolMethodology

APR to APY Calculator

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These fields start with sample inputs. Keep them or replace them, then run the tool to show a fresh result.

Number fields accept plain values and common formatted input such as 250000, 250,000, or 1,234.56.

Result

Calculating the sample result.

Why it matters

APR and APY are often quoted interchangeably in casual conversation, but compounding means they are not the same number.

When to use

  • Comparing interest-bearing accounts or borrowing quotes
  • Translating nominal rates into effective annual terms
  • Checking how compounding frequency changes the true annual result

Inputs & Outputs

Inputs

  • APR is the quoted nominal annual rate.
  • Compounding periods per year determine how often the rate is applied.

Outputs

  • APY is the effective annual rate after compounding is considered.
  • Rate lift shows how much higher the effective annual result is than the nominal APR.

Effective annual yield conversion

Divide APR by the number of compounding periods, apply that periodic rate across all periods in the year, and subtract one to get the effective annual rate.

APY = (1 + APR / periods)^periods - 1

Worked example

1

Monthly compounding example

An account quotes 5% APR with monthly compounding.

Inputs

  • APR: 5%
  • Periods: 12

Steps

  • APY = (1 + 0.05 / 12)^12 - 1

Result

  • The effective APY is about 5.12%.

Edge cases & caveats

  • This conversion assumes the rate remains stable for the full year.
  • Different fees or promotional structures can change the effective result in practice.

Frequently Asked Questions

Why is APY higher than APR when compounding is positive?

Because interest earns interest. Each compounding period adds a small amount that also compounds later.

Does compounding frequency matter much?

The effect is usually modest, but it can be meaningful when comparing products with similar headline rates.

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