APY Calculator
Convert a nominal rate into the annual percentage yield (APY) for any compounding frequency, or project a deposit balance over a term.
APY (effective yield)
6.66%
Nominal: 6.5% p.a.
Growth factor
1.07x
1 unit grows to this much in a year
Compounding periods
4 per year
APY shows the true annual return after compounding. A 6.5% p.a. nominal rate compounded quarterly earns 6.66% per year — useful when comparing savings accounts, CDs and bonds that compound at different frequencies.
Last updated: January 2026
How this calculator is verified
Checked by True Calculator automated test suite on
- Formula verified against a published worked example in the automated test suite
- Edge cases (zero, negative, boundary and unit-mismatch inputs) covered by unit tests
The full verification method is on our how we verify page. Found an error? Tell us and we will re-check it.
When to Use This Calculator
APY exists to make different products comparable. Savings accounts compound daily or monthly, certificates of deposit compound quarterly or semi-annually, bonds pay simple coupons, and some schemes quote effective rates directly — the same advertised rate can mean materially different earnings depending on the compounding frequency. This calculator is useful when choosing between a savings account and a CD, checking a bank's marketing claim about effective yield, or comparing a bond's coupon with a deposit. Balance mode also projects what a deposit grows to over a term, which is what most people actually want to know before committing money. Whenever a financial product quotes a nominal rate with a compounding schedule, this tool reveals the true annual figure behind it.
How to Use This Calculator
- Step 1: Enter the nominal annual rate quoted by the bank, CD or bond — for example 6.5.
- Step 2: Choose how often interest compounds from the frequency list, including weekly and continuous.
- Step 3: Read the APY — the true annual yield after compounding — plus the growth factor and compounding periods.
- Step 4: Switch to balance mode, add a deposit and term, and read the final balance and interest earned.
Worked Example
A $10,000 deposit at a 3% nominal rate compounded daily earns an APY of 3.045%, so after 5 years the balance is $11,618 — versus $11,593 with yearly compounding. At 2% compounded quarterly the APY is 2.015%, barely above the quoted rate; at 12% compounded monthly it rises to 12.68%. The growth factor — for example 1.07x for a 6.5% rate compounded quarterly — is what one unit grows to in a single year, which makes offers with different frequencies directly comparable. The gap between offers widens with the amount and the term.
Tips and Common Mistakes
- •Tip 1: Always compare deposit products by APY, never by the quoted nominal rate alone.
- •Tip 2: Check the compounding schedule in the product terms — daily compounding beats monthly at the same nominal rate.
- •Tip 3: Use balance mode with the actual term to compare the end balances of two offers, not just their percentages.
- ✗Mistake 1: Treating the nominal rate as the actual yield — with quarterly compounding the gap widens over long tenures.
- ✗Mistake 2: Forgetting that APY is a gross figure — taxes on interest income reduce what you actually keep.
Frequently Asked Questions
What is the difference between APY and a nominal rate?
The nominal rate is the quoted annual rate before compounding; APY is what you actually earn after compounding is applied. A 6.5% p.a. rate compounded quarterly gives a 6.66% APY, so the effective yield is higher than the advertised rate.
Why do Indian banks quote rates differently from APY?
Indian banks usually quote simple annual rates, and fixed deposits state how interest is compounded — quarterly for many FDs. Comparing two FDs with the same quoted rate but different compounding frequencies is misleading without converting both to APY.
How often do Indian fixed deposits compound interest?
Most Indian banks compound FD interest quarterly, though some compound monthly or half-yearly. The compounding frequency directly changes the APY, so check the FD's terms before comparing it with a bond or savings account.
Is APY the same as the effective annual rate (EAR)?
Yes, they are the same concept — the true annual return including compounding. Some countries call it the effective annual rate; the formula is identical. This calculator also supports continuous compounding, which is used for theoretical comparisons.
Can I use this calculator for loans?
For loans, the equivalent concept is the effective interest rate or annual percentage rate (APR), which includes fees. APY works for deposits and investments where you earn interest, not for what you pay on a loan.
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