APY Calculator for Savings
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Savings APY Calculator
Your Annual Percentage Yield (APY)
–.–%
Understanding APY for Your Savings
The Annual Percentage Yield (APY) is a standardized way to express the rate of return on an investment or savings account. It accounts for the effect of compound interest, meaning that your interest earnings start to earn interest themselves over time. This can significantly increase your overall returns compared to simple interest.
How is APY Calculated?
The formula for calculating APY is:
APY = (1 + (r/n))n - 1
Where:
r is the nominal annual interest rate (expressed as a decimal).n is the number of times the interest is compounded per year.
For example, if a savings account has a nominal annual interest rate of 4.5% and compounds monthly (12 times a year), the APY would be calculated as follows:
- Nominal rate (r) = 4.5% = 0.045
- Compounding frequency (n) = 12
- APY = (1 + (0.045 / 12))12 – 1
- APY = (1 + 0.00375)12 – 1
- APY = (1.00375)12 – 1
- APY = 1.045939 – 1
- APY = 0.045939 or approximately 4.59%
In this example, even though the nominal rate is 4.5%, the APY is 4.59% due to the effect of monthly compounding.
Why APY Matters for Savers
When comparing different savings accounts, certificates of deposit (CDs), or other interest-bearing financial products, always look at the APY. It provides a more accurate picture of your potential earnings because it reflects the true rate of return after considering the power of compounding. A higher APY means your money grows faster.
This calculator helps you understand the effective yield of your savings based on the stated interest rate and how often it's compounded. While the 'Initial Deposit' does not affect the APY percentage itself, it's included here for context, as APY is a measure of return on that principal.
function calculateAPY() {
var principal = parseFloat(document.getElementById("principalAmount").value);
var rate = parseFloat(document.getElementById("interestRate").value);
var frequency = parseFloat(document.getElementById("compoundingFrequency").value);
var apyResultElement = document.getElementById("apyResult");
if (isNaN(rate) || isNaN(frequency) || frequency <= 0) {
apyResultElement.textContent = "Invalid input";
return;
}
// Convert annual rate to decimal
var rateDecimal = rate / 100;
// APY formula: APY = (1 + (r/n))^n – 1
var apy = Math.pow((1 + (rateDecimal / frequency)), frequency) – 1;
// Format result to percentage with two decimal places
var formattedAPY = (apy * 100).toFixed(2);
if (isNaN(formattedAPY)) {
apyResultElement.textContent = "Error";
} else {
apyResultElement.textContent = formattedAPY + "%";
}
}