Annual percentage yield (APY)
The real yearly rate of return once compounding is included.
Annual percentage yield (APY) is the effective annual rate of return on savings or an investment after accounting for compounding within the year. Unlike a simple nominal rate, APY reflects how often interest is added, so it lets you compare accounts on equal footing: APY = (1 + r ÷ n)^n − 1, where r is the nominal rate and n the number of compounding periods per year.
Example: A 5% nominal rate compounded monthly gives an APY of about 5.12%.