2007-07-04 08:18:53 · 3 answers · asked by H-D Softail 3 in Business & Finance ➔ Personal Finance
It's kind of the other way around. The APY is like extra money on top of the rate. That's because, you'll get paid the rate each month (quarter or whatever) on your original balance. Then that original balance + the interest paid becomes the new balance used to pay the rate the next month. So you're making interest on the interest you've been paid. That compounding of interest is what gives you the APY or annual percentage yield.
2007-07-04 08:37:09 · answer #1 · answered by Anonymous · 2⤊ 0⤋
APY is a Federal Reserve Bank formula that all insured depositories, banks, credit unions, thrifts, must disclose so that consumers can compare accounts with different terms and payment structures. If you deposit $100 for one year you would earn the APY. Actual interest earned can be different than the APY, but it will be quite close, usually pennies.
Your stated interest rate (the rate paid at each compounding period, monthly, quarterly etc.) will usually be lower than the APY unless the account pays once a year, due to the compounding discussed above.
2007-07-04 16:00:54 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Compounding, if you have a rate like 4.16 and compound it your actual APY is 4.25. So that is your annual percentage yield.
2007-07-04 15:25:58 · answer #3 · answered by shipwreck 7 · 0⤊ 0⤋