APY / APR Converter
Convert between APR (nominal) and APY (effective yield) for any compounding frequency, including continuous. See the compounding lift in percentage points.
APY / APR converter
Enter the rate as a percent (for example, 5.25 means 5.25%).
Result
APR (nominal)
5.0000%
APY (effective)
5.1162%
Compounding lift: 0.1162% (APY minus APR)
Frequently Asked Questions about the APY / APR Converter
What is the difference between APR and APY?
APR is the nominal annual rate, ignoring compounding. APY is the effective annual yield after compounding is applied. For the same APR, more frequent compounding produces a higher APY. A 5% APR compounded monthly works out to roughly 5.116% APY.
When is APR the better number to compare?
Use APR when comparing the stated rate on loans and mortgages, where US disclosure rules require APR. Use APY for savings accounts, CDs, and money market accounts, where US Truth in Savings rules require APY.
How does continuous compounding fit in?
Continuous compounding is the mathematical limit as the number of periods per year goes to infinity. APY equals e raised to APR minus 1, and APR equals ln(1 + APY). For most retail products the difference between daily and continuous compounding is too small to matter.
Why is APY always higher than APR for positive rates?
Each compounding period adds interest on top of the previous balance, so you earn interest on interest. The more frequent the compounding, the larger that lift. APR and APY are equal only when there is exactly one compounding period per year.
Can APY ever be lower than APR?
Only when the rate is negative (rare for retail products). For positive rates with discrete compounding the inequality APY is at least APR is strict, with equality only at n equal to 1 or APR equal to 0.