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Annual Percentage Yield is a percentage rate reflecting the total amount of interest paid on a deposit account based on the interest rate and the frequency of compounding for a 365-day year.
APY is the annual rate of return on an investment, which must be disclosed by law and which varies by the frequency of compounding.
Example 1: A $1,000 investment that earns 6% per year pays $60 at year-end and has an APY of 6%.
Example 2: A $1,000 investment that earns 0.5% per month (6%/12) pays $61.68 in one year and has an APY
of 6.17%.
Example 3: A $1,000 investment that earns 0.0164% per day (6%/365) pays $61.83 in one year and has an APY of 6.18%.
