How the APY is Calculated

Periodic compounding

The total accumulated value, including the principal sum
plus compounded interest
, is given by the formula:
{\displaystyle A=P\left(1+{\frac {r}{n}}\right)^{nt}}
  • 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).