APY
Annual Percentage Yield - the real rate of return on savings including compound interest.
APY accounts for compound interest to show the actual annual return on a savings or investment account. Because interest compounds (you earn interest on interest), APY is always higher than the simple interest rate for accounts that compound more than once per year. Banks are required to disclose APY on deposit accounts.
Example
A business savings account offers 4.5% APY compounded daily—depositing $50,000 earns approximately $2,250 in interest over one year, slightly more than simple 4.5% due to compounding.
Why It Matters for Your Business
APY lets you compare savings accounts accurately—a 4.0% APY account compounding daily actually earns more than a 4.1% account compounding annually.
Related Terms
More Banking Terms
ACH
Automated Clearing House - an electronic network for financial transactions.
APR
Annual Percentage Rate - the yearly cost of borrowing including fees.
Bank Reconciliation
Matching bank statements with internal records to identify discrepancies.
Business Checking
A bank account designed for business transactions.
Line of Credit
A flexible loan allowing businesses to borrow up to a limit as needed.
Related Financial Guides & Resources
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