Nominal rate → effective yield (APY) calculator
What compounding frequency is worth.
Interactive: nominal rate → effective yield (APY)Easy
"4% compounded monthly" and "4% compounded annually" are different offers. Compounding frequency turns a nominal rate into the yield you actually earn.
- Effective yield (APY)
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- If compounded daily
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- Continuous limit
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- Extra on $1,000 / year
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APY = (1 + n/m)^m − 1. The gap between nominal and effective is small at today's rates and was the entire marketing industry of banking's small print for decades.
The idea behind it
This calculator belongs to Money Markets, where the mechanism it computes is explained step by step, with the formula, what each input means and where the simple model stops being right. Everything is computed in your browser; nothing you type is sent anywhere.
Instruments it applies to
- Savings Deposit — The product almost everyone owns and almost nobody analyses: a loan you make to a bank, repayable on demand, at a rate the bank chooses.
- Treasury Bill — Government debt measured in weeks: the closest thing in finance to cash that pays interest.
- Repo — Sell a bond today, buy it back tomorrow: the secured loan that finances the entire bond market.
- Commercial Paper — Corporate IOUs measured in days — how blue-chip companies borrow between bond issues and bank lines.
- Certificate of Deposit — A deposit with a term and a rate — the same instrument at the savings branch and on a bank funding desk.
- Money Market Fund — The mutual fund that pretends to be a bank account — cash parked in the market's overnight instruments.
- Securities Lending — Renting out shares you already own. The invisible plumbing that makes short selling, market making and settlement work — and quietly earns fund holders a few basis points.
- Structured Deposit — A deposit whose interest depends on a market. Capital protected by the bank, upside capped by the option budget — and the budget is smaller than the brochure suggests.
More calculators from Money Markets
- T-bill yield converter — discount rate, bond-equivalent, effective.
- Repo haircut & leverage — the system's leverage dial.