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How the APY is Calculated

Periodic compounding

The total accumulated value, including the principal sum
P
plus compounded interest
I
, is given by the formula:
​
{\displaystyle A=P\left(1+{\frac {r}{n}}\right)^{nt}}
​
where:
  • A is the final amount
  • P is the original principal sum
  • r is the nomial annual interest rate
  • n is the compounding frequency
  • t is the overall length of time the interest is applied (expressed using the same time units as r, usually years).