APY/APR Calculator
Calculate and compare Annual Percentage Yield vs Annual Percentage Rate
Calculate Your Returns
Initial investment amount
Annual percentage rate
How often interest compounds
Investment duration
Understanding APY vs APR
What is APR?
Annual Percentage Rate (APR) is the simple interest rate you earn or pay over one year, without taking into account the effects of compounding.
Example: $10,000 at 12% APR for 1 year = $10,000 × 0.12 × 1 = $1,200 interest
What is APY?
Annual Percentage Yield (APY) takes into account compound interest, which means you earn interest on your interest. This is the actual return you'll receive.
Example: $10,000 at 12% APR compounded daily = $1,274.75 interest (12.75% APY)
Key Differences
| Feature | APR | APY |
|---|---|---|
| Includes Compounding | ❌ No | ✅ Yes |
| Formula | Simple | Compound |
| Better for Comparison | Less accurate | More accurate |
| Used By | Loans, Credit Cards | Savings, Investments |
| Value | Always lower or equal | Always higher or equal |
Why This Matters in DeFi
1. Most DeFi protocols show APR: They advertise the base rate without compounding, which can be misleading. The actual returns (APY) are higher if you reinvest rewards.
2. Auto-compounding vaults: Some protocols like Yearn Finance automatically reinvest your rewards, effectively turning APR into APY.
3. Liquidity mining rewards: When you earn token rewards from providing liquidity, manually claiming and reinvesting them increases your effective APY.
4. Gas fees matter: Frequent compounding costs gas fees on Ethereum. On L2s or other chains, you can compound more often for better returns.
Real DeFi Examples
• If compounded daily: ~3.56% APY
• Extra earnings: ~$6 per year on $10,000
• With auto-compound: ~5.13% APY
• Plus CRV rewards: Total APY can be 8-12%
• Manual compound weekly: ~15.8% APY
• Manual compound daily: ~16.2% APY
• More work, but higher returns!
Pro Tips for Maximizing Returns
Use Auto-Compounding Vaults
Platforms like Beefy Finance and Yearn automatically reinvest your rewards, maximizing APY without manual work.
Compound Regularly
Set a schedule: daily on L2s (cheap gas), weekly on Ethereum mainnet. Even monthly compounding beats no compounding.
Consider Gas Fees
If gas costs $50 and you earn $10 interest, compounding isn't worth it. Use L2s or wait for larger positions.
Always Compare APY, Not APR
Two protocols with same APR but different compounding frequencies will have different actual returns. APY shows the truth.