APY
Or annual percentage yield. APY is the annual rate of return on an investment. (Collins English Dictionary).
This is the annual rate of interest plus the effect of compounding on the interest earned. This is the number quoted when banks and other financial institutions try to get you to deposit money in savings accounts or buy certificates of deposit. In these cases, you are the lender, so the higher the APY, the more money you will make from amounts on deposit. (The Pennsylvania State University, 2008)
Refers to the amount of money, or interest, you earn on a bank account over one year. There are two types of interest that people often refer to and they can be confused for one another: simple interest and compound interest.
Simple interest doesn't build on itself, so you earn the same amount of interest every period.
Compound interest is the interest earned on both the money you put into the account and the interest you receive over time.
APY includes compound interest. And interest can be compounded daily, monthly or annually, depending on the account. (Tierney, 2023)
APY definition and meaning. (2024). In Collins Dictionaries. Retrieved from https://www.collinsdictionary.com/dictionary/english/apy
The Pennsylvania State University. (2008). Annual percentage rates, annual percentage yields, and finance charges. Retrieved from https://shorturl.at/dhiq9
Tierney, S. (2023, December 20). What is APY? Annual Percentage yield Definition and how it works. Retrieved from https://www.nerdwallet.com/article/banking/what-is-apy