Annual Percentage Yield

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.

Read more about Annual Percentage Yield:  Equation, United States

Other articles related to "annual percentage yield":

Annual Percentage Yield - United States
... 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 ...

Famous quotes containing the words yield, annual and/or percentage:

    Thus did he yield me in the shady night
    A wondrous and instructive light,
    Which taught me that under our feet there is,
    As o’er our heads, a place of bliss.
    Thomas Traherne (1636–1674)

    Time that scatters hair upon a head
    Spreads the ice sheet on the shaven lawn;
    Signing an annual permit for the frost....
    Philip Larkin (1922–1986)

    Actually, if my business was legitimate, I would deduct a substantial percentage for depreciation of my body.
    Contemplative and bookish men must of necessitie be more quarrelsome than others, because they contend not about matter of fact, nor can determine their controversies by any certain witnesses, nor judges. But as long as they goe towards peace, that is Truth, it is no matter which way.
    John Donne (c. 1572–1631)