What is Apr vs APY in crypto?

APR vs. APY in Crypto: Which Gives Better Returns? APR (Annual Percentage Rate) is a “simple” interest rate that shows how much interest on the principal you’ll annually receive as an investor/lender or pay as a borrower. APY (Annual Percentage Yield) factors in compound interest, where you earn (or pay) interest on the principal + its interest.

How is APY calculated?

APY is calculated as seen in the formula below. In the calculation, pay attention to the compounding periods, you have to calculate the interest rate per period (say week, or month), rather than using the standard yearly rate. 0% APR allows you to borrow at zero percent interest rates.

What is APY (annual percentage yield)?

APY (annual percentage yield) is the actual rate of return you earn on an investment. APR takes the effect of compounding interest into account. While APR is calculated using simple interest, the annual percentage yield (APY) uses compound interest.

How do I calculate the annual interest rate (APR)?

To calculate the APR, first, calculate the interest using the simple interest formula. With interest, you can proceed to calculate the APR as follows: Based on this calculation, the annual interest rate may be 5%, but the real cost is actually 5.15% when you factor in additional fees on top of the interest.