Annual Percentage Yield (APY)

The percentage rate that reflects the true amount of interest from a saving account or the annual rate of return. The Annual Percentage Yield is based on the interest rate and the frequency of compounding over the year. This rate is measured by having one plus the periodic rate raised to the number of periods in a year. Since the interest rate is compounded, the annual percentage rate is not enough to measure the return of loans of investment. As an example a 1% per month rate will have an APY of 12.68% as opposed to to an APR of 12%< value1!>

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