Annual Percentage Yield (APY)

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Definition: Annual Percentage Yield (APY)

Annual Percentage Yield (APY) is also referred to as the Effective Annual Rate (EAR).

It is the annualized interest rate considering the impact of compound interest for a period of one year.

Generally, APY is used for an investor, for the rate paid to the investor while APR is used for a loan where the interest is paid by the borrower. APY also brings all the offerings to a common platform allowing one to compare among various alternatives.

Mathematically, it can be calculated as:

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