The Motley Fool Discussion Boards

Previous Page

Investing Education / Terms, Definitions, & Jargon

URL:  https://boards.fool.com/greetings-whats-the-difference-between-an-23022913.aspx

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

Greetings,

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.

Regards,
JB
Copyright 1996-2022 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us