# Convert APR to APY.

Annual Percentage Rate (APR) and Annual Percentage Yield (APY) may seem similar, but knowing the difference and how they are used will help you make better financial decisions.

Try entering different values in the APR to APY calulcator to see how they’re related.

## Equivalent of 4.00% APR at different

Compounding Frequencies

# Real Interest Rate

## My Real Interest Rate

i

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. CPI measurement taken from bls.gov.### What is inflation?

Inflation is the change in prices of everyday goods and services. If inflation increases, then this means that the things you buy are getting more expensive, faster.

#### Do you know your Real Interest Rate?

Real Interest Rate = APY - Inflation Rate

# APR vs APY

# APR

## What is APR?

APR (Annual Percentage Rate) is the annual rate of return — expressed as a percentage — before factoring in compound interest. You’ll run into this most often when considering loan terms, and how much you’ll have to pay to borrow.

### Example:

Let’s say you would like to calculate how much interest will accrue today on your credit card. Your credit card charges 19.00% APR, compounds daily, and has a balance of $1000.

- Express your APR as a decimal by dividing by 100.
- Divide your APR by the number of compounding periods.
- Multiply this number by your credit card balance.

Daily Interest Accrued = 1000 x 0.19 / 365

In this case, your daily interest accrued would be $0.52. This amount would then be added to your balance for tomorrow’s calculation.

#### Try it out!

Calculate the interest that will accrue on your real credit card. Get your credit card APR, compounding frequency, and current balance to calulcate how much interest you’ll accrue during the current period.

# APY

## What is APY?

APY (Annual Percentage Yield) is the annual rate of return — expressed as a percentage — once you factor in compound interest. You’ll run into this most often when considering deposit accounts, and how much you’ll earn on your deposit.

### Example:

Let’s say you want to calculate how much interest your savings account will pay you after one year. Your savings account pays 2.00% APY, and you have a balance of $1000.

- Express your APY as a decimal by dividing by 100.
- Multiply this number by your account balance.

Expected Annual Interest = 1000 x 0.02

In this case, your expected annual interest accrued would be $20.00. Your expected balance at the end of the year would be $1020.00.

#### Try it out!

Calculate your expected annual interest on your savings account balance. Get your APY and your current balance from your bank’s website to calculate how much interest you’ll earn over the year.