APY Calculator
This APY calculator converts a nominal (stated) interest rate into its true effective annual yield, accounting for how often it compounds. Enter the advertised rate and compounding frequency to see what you'll actually earn over a full year.
The advertised annual rate, before accounting for compounding frequency.
How often interest is calculated and added to your balance.
Effective annual yield (APY)
4.60%
The real annual return, accounting for compounding — always at least as high as the nominal rate.
How to use this apy calculator
- 1Nominal (stated) interest rate: the advertised annual rate — often shown as APR on the account's marketing materials.
- 2Compounding frequency: check the account terms — savings accounts commonly compound daily, CDs vary by institution.
Understanding your results
APY is your true effective annual return — always equal to or higher than the nominal rate, since more frequent compounding means interest starts earning its own interest sooner within the year. This is the number that actually determines how much you'll earn, and it's the figure banks are legally required to disclose alongside (or instead of) the nominal rate for savings products.
The formula
APY = (1 + Nominal rate ÷ n)^n − 1, where n is the number of compounding periods per yearThe nominal rate is divided into n compounding periods per year (365 for daily, 12 for monthly, and so on), applied and compounded that many times, then converted back to an annual percentage. More frequent compounding periods produce a slightly higher APY at the same nominal rate, since each period's interest starts earning interest sooner.
A worked example
A 4.5% nominal rate compounding daily produces an APY of about 4.60% — a small but real difference from the nominal rate, purely from daily compounding. The same 4.5% nominal rate compounding only annually would have an APY of exactly 4.50%, since there's no intra-year compounding to boost it.
Notes for the UK, US and India
When comparing savings accounts or CDs, always compare APY, not the nominal rate — a bank advertising a slightly lower nominal rate but daily compounding can genuinely out-earn a competitor with a higher nominal rate but only annual compounding.
Frequently asked questions
Is APY the same as APR?+
No — APR (annual percentage rate) is typically the nominal rate before compounding, most often used for loans. APY (annual percentage yield) accounts for compounding and is the standard disclosure for savings products. For the same nominal number, APY is always equal to or higher than APR.
Does more frequent compounding always matter a lot?+
The difference shrinks as compounding gets more frequent — the jump from annual to monthly compounding is meaningfully larger than the jump from monthly to daily, since the math approaches a mathematical limit (continuous compounding) as periods increase.
Why do banks advertise APY instead of the nominal rate?+
In many countries it's a regulatory requirement for savings products specifically, designed to let consumers compare accounts on a like-for-like basis regardless of each bank's compounding frequency.
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