Annual Percentage Rate (APR)
The yearly interest rate without accounting for compound interest.
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.
