APY vs APR: What's the difference? đ€
âą What Is APR? APR (Annual Percentage Rate) is the annual interest rate without considering the effects of compounding. For example, a $10,000 deposit at a 20% APR would earn $2,000 in interest after one year, totaling $12,000 đž
âą What Is APY? APY (Annual Percentage Yield) includes the effects of compound interestâearning interest on your interest. With the same $10,000 at 20% APR but compounded monthly, your balance would grow to approximately $12,194 after one year đž
Why Does It Matter? The frequency of compounding can significantly impact your returns over time. When comparing financial products or, for example, crypto products (like staking or yield farming) ensure you're considering whether rates are quoted as APR or APY and how often interest is compounded đââïž
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