APR vs APY: What's the Difference?
The 5 percent on the poster is the yearly rate before that effect; the APY includes it.
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1.What does APY include that a plain rate does not?
The 5 percent on the poster is the yearly rate before that effect; the APY includes it.
2.Where do you usually see APY and where APR in the US?
For a loan, the APR is the interest rate plus certain fees turned into one yearly number (CFPB).
3.Offer A is 5.10 percent once a year and Offer B is 5 percent monthly. Which leaves 1,000 with more?
Offer B adds interest every month, and from then on that interest earns interest too (worked example).
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Sources (6)
- CFPB: What is the difference between a loan interest rate and the APR?
- CFPB: Credit cards key terms
- Regulation DD (12 CFR Part 1030), Appendix A: Annual Percentage Yield Calculation (Wortlaut
- CFPB: The Consumer Credit Card Market
- Eigene Berechnung (Formel APY = (1 + APR/n)^n - 1, keine Gebuehren, Zinsen verbleiben auf
- Eigene Berechnung (Python)
Education only. Not financial advice.