Annual Percentage Rate (APR)
The yearly interest rate without accounting for compound interest.
- Type
- financetrading
- Also known as
- APR
Annual Percentage Rate (APR) represents the yearly interest charged or earned without considering compounding within the year. It's commonly used in lending and some staking products.
- APR focuses on the nominal rate
- APY includes compounding effects
For a nominal rate r with n compounding periods per year, the relationship is: APY = (1 + r / n)^n - 1 Given APY, the equivalent nominal APR with n periods is: APR = n × ((1 + APY)^(1/n) - 1)
A platform advertises 10% APR compounding monthly. The effective APY is (1 + 0.10/12)^12 - 1 ≈ 10.47%.
Marketing materials may mix APR and APY. Verify which metric is quoted and the compounding frequency to compare offers fairly.
Related Terms
Annual Percentage Yield
→The projected annual return, factoring in compound interest.
DeFi
→DeFi, or Decentralized Finance, is a revolutionary sector in the blockchain industry that uses smart contracts to create permissionless financial services that are open to everyone and operate without intermediaries.
Liquidity
→The ease with which a crypto asset can be bought or sold without affecting the market price.
All terms and definitions may update as the Cryptionary improves.
