what is apy used for
The Annual Percentage Yield (APY) is a financial tool used to ascertain how much a deposit earns. It is a standardized way of comparing investments. Consumers want their money to be working at its best for them, and this means putting it where it will receive the best APY.
APY stands for Annual Percentage Yield, which is a formula used to compare stated interest rates that have different compounding periods.
This is where the APY formula (shown below) can be used to translate each stated rate into rates that can be compared (apples to apples). 1  APY = (1 + r/n )n â 1 where r is the quoted annual interest rate and n is the number of times the interest is compounded per year. Of course, it will be much easier to skip the manual calculation and simply use the APY Calculator on this page.