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Subject: Re: How much is 5.25% APY anyway..  Date: 12/10/1999 11:54 AM  
Author: SpaceEngineer  Number: 21618 of 311980  
OK you foolish mathmaticians, I need a little help. Im not the greatest with math so here goes. Im trying to decipher exactly how this works and how much money I would make on intermediate savings account. If Providian National is offering an APY of 5.25% on $2000 that's being compounded daily. How do I really figure out how much money I'd be getting in interest for sayyy 2yrs. Correct me if I'm wrong, but I believe that Annual Percentage Yield (APY) is how much your money earns in a year, and takes into account the compounding. Therefore, after one year, your $2000 gains 5.25% and thus becomes $2105. The second year, that $2105 gains 5.25% and becomes $2215.51. Annual Percentage Rate is a smaller number. To convert to APY, you must divide APR by the number of compounding periods, and that to one, raised that number to the numberofcompoundingperiodsinayear and subtract one. Assume APR of 5.117% and daily compounding (365 days a year [this year, at least.]) APY = ((1 + (APR/365))^365)  1 APY = ((1 + (0.05117/365))^365)  1 = 0.0525 (5.25%) People borrowing your money (savings accounts, etc.) like to quote APY, as it is a larger number, and people loaning you money (CC's, car loans, etc.) like to quote APR as it is smaller. John 

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