Help CenterAPR (Annual Percentage Rate) and APY (Annual Percentage Yield) are both commonly used to describe the interest rate or return on investment for financial products, including cryptocurrencies.
APR refers to the interest rate that is charged or earned over a period of one year, without taking into account the effects of compounding. This means that if you invest $100 with an APR of 5%, you will earn $5 in interest over the course of a year.
On the other hand, APY takes into account the effects of compounding, which means that interest earned on the initial investment is reinvested and earns additional interest. As a result, APY provides a more accurate representation of the actual return on investment.
For example, if you invest $100 with an APY of 5%, you will earn $5.13 in interest over the course of a year because the interest earned in each period is added to the principal amount, and then the new total amount earns interest in the next period, and so on.
In summary, APR is the simple interest rate, while APY takes into account compounding and provides a more accurate representation of the actual return on investment. It's important to understand the difference between these two terms, especially when comparing financial products or choosing investment opportunities.
Simple APR to APY coversion calculator: https://www.aprtoapy.com/