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Subject:  Re: Interest rate versus APY Date:  9/13/2005  9:24 AM
Author:  jbking Number:  1587 of 2244


What's the difference between an "interest" rate and an "APY" rate?

By "interest" rate you likely mean an APR,annual percentage rate, which doesn't take into account compounding that an APY, annual percentage yield, does.

For example, let's say you could get a 4% APR CD that pays interest quarterly. This means you'd get 1% each quarter which compounded is 4.060401% taken to as many decimals as possible, though most would just round it off at 4.06% APY.

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