Dictionary > Finance > A > Annual Percentage Yield (APY)

# Finance Dictionary - A Terms

# Annual Percentage Yield (APY)

The effective, or true, annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the affect of compounding. The APY is calculated by taking one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate has an APY of 12.68% (1.01^12).