#### Definition:

Annual Percentage Yield (APY) refers to the effective interest rate which is paid on an investment over the given period time based on the annual percentage rate. ** Annual Percentage Rate (APR)** is the interest rate charged on the amount borrowed and it replicates the annual cost of borrowing money.

#### Formula:

Periodic Rate = APR / n
APY = (1+Periodic Rate)^{n} - 1
###### Where,

n = Number of Periods
APY = Annual Percentage Yield
APR = Annual Percentage Rate
#### Example :

John borrowed 7% interest rate on his investment for 12 months then, what will be the John's Annual Percentage Yield?

##### Given :

APR = 7% = 0.07
Number of Period (n) = 12 months

##### Solution :

Periodic Rate = APR / n
= 0.07 / 12
Periodic Rate = 0.005833333
APY = (1+Periodic Rate)^{n} - 1
= (1+0.005833333)^{12} - 1
= 1.072290077 - 1
= 0.072290077
APY = 7.229 %

##### Result :

Annual Percentage Yield is 7.229 %