APY

APY, or annual percentage yield, is the rate of dividends earned on a credit union account over a year, taking into account the effect of compounding.

More Details

APY stands for annual percentage yield. It is a measure of the interest rate earned on an investment over a year, expressed as a percentage of the investment's principal. It is similar to the annual percentage rate (APR), which is a measure of the cost of borrowing money, also expressed as a percentage.

Example

If you have a savings account with a 2% interest rate that compounds monthly, the APY on that account would be higher than the APY on a similar account with the same interest rate but that compounds annually. This is because the interest earned on the monthly compounding account is reinvested more frequently, resulting in a higher overall return.

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