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APY Formula
Before learning the APY formula, let us recall what is APY. It is an acronym used for annual percentage yield. APY, on compounding interest, is the rate earned on the investment. APY is the real RR(rate of return) earned on the savings. Let us learn the formula of APY along with a few solved examples.
What Is the APY formula?
APY formula is used to calculate the annual percentage yield quickly. It is expressed in terms of the annual interest rate and the number of compounding periods. The APY formula is:
APY = (1 + r/n )^{n} – 1
Where,
 r = annual interest rate
 n = number of compounding periods each year
Let us see the applications of the APY formula in the following section.
Solved Examples Using APY Formula

Example 1: Find the APY on $1000 at the compound interest rate of 5%, compounded monthly.
Solution:
Using the APY formula
APY = (1 + r/n )^{n} – 1
APY = ( 1 + 0.05/12)^{12}  1
APY = 0.0511
Answer: The APY is 5.11%

Example 2: Find the APY on $100 at the interest rate compounded quarterly at 6%.
Solution:
Using the APY formula
APY = (1 + r/n )^{n} – 1
APY = ( 1 + 0.06/3)^{3}  1
APY = 0.0612
Answer: The APY is 6.12%
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