Definition
Annual Percentage Yield (APY) is the effective annual rate of return on an investment or deposit, considering the effects of compounding interest.
Related Services
APY is often applied in banking, savings account management, and investment planning to compare financial products and maximize returns.
Problem and Application
The main challenge with APY is understanding its calculation, especially when compounding frequencies vary. Financial advisors and banks use APY to attract customers and explain the potential growth of investments.
Conclusion
APY is an essential metric for comparing financial products and understanding the compounding impact on returns, enabling better decision-making for investors and savers.
