What's the difference between interest rate and APY?
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Written on: 16.11.2009 [17:45]
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Kunjal
Kunjal
Topic creator
Posts: 1
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Hi there, what's the difference between interest rate and APY? I know it's the Annual Percentage Yield, blah blah, but I don't know how much interest I'll actually get PAID in the end, which is all that interests me! |
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Written on: 20.11.2009 [20:20]
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Westwood
Westwood
Posts: 1
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If all you're worried about is how much you'll be paid in the end you can just ask your financial advisor to give you a figure based on how much you're planning to invest! APY is the Annual Percentage Yield, like you said. The APY is a more accurate description of the amount of interest you will actually be paid over the year than the basic interest rate. The basic interest rate is compounded each month or year (depends on the particular terms of the account). The APY takes the compounding into account and illustrates how much interest you'll get paid in the end! The more frequently the interest is compounded, the more you earn. If you find a deal where the APY is significantly higher than the basic interest rate, this is an indication that the interest is compounded on a regular basis, which makes it a good deal! |
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