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Calculate the annual percentage yield (APY) including the effect of compounding.
APY = (1 + r/n)^n - 1. Where r = stated rate and n = compounding periods per year.
Result: APY: 5.12%, Nominal: 5%
APR is the simple rate. APY includes compounding effects. APY is always >= APR.
More frequent compounding increases effective yield. Daily > monthly > yearly for the same nominal rate.
Use APY to compare accounts directly since it already factors in compounding frequency to give you a true annual rate of return.
High-yield savings accounts currently offer 4 to 5 percent APY, which is significantly higher than traditional brick-and-mortar bank savings rates.