Annual Percentage Yield (APY) - Savings Accounts

The annual rate of interest that is paid to account holders for savings deposits is expressed in APY, or annual percentage yield. The APY takes into account the compounding of interest, is based on a 365 day year cycle and supposes no withdrawals or deposits to the account. The APY helps to translate differently expressed yields into a practical and easily understandable format for the consumer and investor alike.

For those that wish to calculate the APY the formula is:

(1 + r) ^np - 1


Where the number of periods (np) value is 12 when interest is compounded monthly. (though if interest would be compounded quarterly, the number of periods value for the APY would be '4')

The rate (r) is equal to the % rate for periods of compounding. If the rate offered is .7% compounded monthly, the resulting APY is actually 8.73%.

(1.007) ¹² - 1 = .0873