I learned from investopedia.com that APR and APY are different things. APR is the annual rate of interest without taking into account the compounding of interest that occurred within the year. On the contrary, APY does take into account the effects of intra-year compounding.
Formulas:
An example may be, a credit card company might charge 1% interest each month. The APR would equal 12% annually. If you have a balance for only a month, the APR will be 12%. However, if the balance is stretched all the way to a year, the interest monthly is compounded, which means you'll be charged 12.68% annually.
Understanding the difference is prime to understanding how interest is calculated in credit cards and investments.
This is very informative and I learned new things reading this.Thanks.
ReplyDeleteThis is very informative and I learned new things reading this.Thanks.
ReplyDeleteThank you candy, I learn a new formula from your post and the difference between APR and APY.
ReplyDeleteAs Christmas Tree stated, this is very informative. Not only did you supply us with a formulas, you gave us an example.
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