Annual Percentage Yield
finance · trading
The effective annual return after accounting for compounding, commonly used to compare yield products.
- Also known as
- APY
Annual Percentage Yield (APY) is the annualized return after compounding. It is useful for comparing products that compound at different intervals, while APR states the nominal yearly rate without compounding.
The standard formula is: APY = (1 + r/n)^n - 1, where r is the nominal rate and n is the number of compounding periods per year.
DeFi APYs are often variable and may be extrapolated from short promotional periods. The advertised rate may not include impermanent loss, token price changes, smart-contract risk, lockups, or fees.
Related terms
Annual Percentage Rate (APR)
→The yearly interest rate without accounting for compound interest.
finance · trading
DeFi
→DeFi uses smart contracts to provide permissionless financial services such as trading, lending, borrowing, and asset issuance.
blockchain · finance · concept
Liquidity
→How easily an asset can be bought or sold in size without causing a large price move.
finance · trading