what does apy mean

APY stands for "annual percentage yield" and is the real rate of return earned on an investment, taking into account the effect of compounding interest. It is a percentage that reflects the amount of money or interest you earn on a bank account over one year. APY includes compound interest, which means that it factors in the interest earned on both the money you put into the account and the interest you receive over time. APY is used to standardize the rate of return and allows for a reasonable, single-point comparison of different offerings with varying compounding schedules. It is commonly used to represent the rate paid to a depositor by a financial institution. The formula for calculating APY is (1+r/n)^n - 1, where r is the period rate and n is the number of compounding periods.