APR ↔ APY Converter
Convert Annual Percentage Rate (APR) to Annual Percentage Yield (APY) accounting for compounding frequency. Essential for comparing loans, FDs, savings accounts, and bonds on equal footing.
APR vs APY — Why the Difference Matters
APR (Annual Percentage Rate) is the nominal rate — simple multiplication of the periodic rate by periods. APY (Annual Percentage Yield) is the effective rate — it accounts for compounding within the year. For a 12% APR compounded monthly: APY = (1 + 0.12/12)^12 − 1 = 12.68%. That 0.68% gap means $6,800 extra per year on a $10L loan or deposit.
Banks quote deposit rates as APY (which looks higher) and loan rates as APR (which looks lower). In the US the Truth in Savings Act requires APY on deposit accounts, while the Truth in Lending Act requires APR on loans — so the two headline numbers are not directly comparable.
APR = n × ((1 + APY)^(1/n) − 1)
Periodic Rate = APR / n
n = number of compounding periods per year
💡 What This Means for You
When comparing two FDs — one at 7.5% compounded quarterly vs another at 7.3% compounded monthly — convert both to APY first. FD1 APY = (1+0.075/4)^4-1 = 7.71%. FD2 APY = (1+0.073/12)^12-1 = 7.55%. FD1 wins despite having fewer compounding periods.
Calculate compound interest growth
Use our Compound Interest Calculator to model CD and savings growth precisely.
Related Tools
Goes deeper on this
Life After the Exit: Managing a Windfall & Building a Legacy (2026 Edition)
You built it and sold it. Now the harder question: how to keep, grow, and pass on a fortune without losing it to taxes, mistakes, or time. Life After the Exit is the post-windfall playbook,
Email me this result
We will send the numbers this page just showed you, plus a link back to it. No account needed.
Keep exploring
