Annual percentage yield (APY) (also called Effective Annual Rate (EAR) in finance) is a normalized representation of an interest rate, based on a compounding period of one year. APY figures allow for a reasonable, single-point comparison of different offerings with varying compounding schedules. However, it does not account for the possibility of account fees affecting the net gain. APY generally refers to the rate paid to a depositor by a financial institution, while the analogous annual percentage rate (APR) refers to the rate paid to a financial institution by a borrower.
To promote financial products that do not involve debt, banks and other firms will often quote the APY (as opposed to the APR because the APY represents the customer receiving a higher return at the end of the term). For example, a CD that has a 4.65 percent APR, compounded monthly, for 8-months would instead be quoted as a 4.75 percent APY.
Other articles related to "annual percentage yield":
... States, the calculation of the APY and the related annual percentage yield earned are regulated by the FDIC Truth in Savings Act of 1991 ANNUAL PERCENTAGE YIELD.--The term "annual percentage yield" means the total ...
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