 |  |  |
| Home | Debt Consolidation | Credit 101 | Money Lessons | Bankruptcy | Financial Calculators |
Annual Percentage Yield |
||
In very simple terms, compounding means making earnings on your earnings. This means that the quoted APY is telling you how much you’re really making on your money. Other ways of quoting a rate don’t necessarily show you the whole picture. And it is a standardized way of comparing investments. How to Get the Best APY In general, you’ll find that the APY is higher for more frequent compounding periods. Ask your financial institution how often they compound. If your money is compounded daily as opposed to quarterly, you will be able to earn a better APY. To pump up your personal APY, find ways to make sure that your money is compounding as frequently as possible. If 2 CD’s pay the same APY, pick the one that pays out interest most often (monthly instead of at maturity, for example). Then, you can reinvest your interest payments and start earning interest on that payment. How APY is Calculated Calculating an investment’s APY can be tricky. If you want to just find out what an APY is with Excel, here's the function: 
where isnom the Nominal interest rate and N is the number of compounding periods per year. The Annual Percentage Yield does not take transaction costs on loans or savings accounts into account; see also Annual percentage rate. |
||
|
|
| © StudyKiosk.com - All Rights Reserved. Contact Us |