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APY / APR Calculator

%
$
days
Annual Percentage Yield (APY)
Daily compounding
10.5156%
APR: 10%→ APY: 10.5156%
Simple Interest
$1,000.00
APR only, no compounding
Compound Interest
$1,051.56
Daily compounding
Compounding Bonus
$51.56
Extra from compounding
Daily Yield
$2.881
Avg compound / day
Calculation Summary
Input Rate10% APR
Converted Rate10.5156% APY
APR10.00%
APY10.5156%
CompoundingDaily (365x/yr)
Principal$10,000
Period365 days
Total Return$1,051.56
Formulas Used
APR to APY: APY = (1 + APR/n)^n - 1
= (1 + 0.1000/365)^365 - 1 = 0.105156= 10.5156%
Compound Interest: P * ((1 + APR/n)^(n * days/365) - 1)
Simple Interest: P * APR * (days/365)

What's the Difference Between APR and APY?

APR (Annual Percentage Rate) is the simple annual interest rate without accounting for compounding. It represents the base rate of return before compounding effects are applied.

APY (Annual Percentage Yield) is the effective annual rate that includes compounding. Because interest earns interest over time, APY is always equal to or greater than APR for the same nominal rate.

For example, a 10% APR compounded daily yields an APY of approximately 10.52%. The more frequently interest compounds, the greater the difference between APR and APY.

How Compounding Frequency Affects Returns

The compounding frequency determines how often earned interest is reinvested. Higher frequency means your interest starts earning interest sooner, creating a snowball effect.

10% APR at Different Compounding Frequencies
Annual (1x)10.0000% APY
Quarterly (4x)10.3813% APY
Monthly (12x)10.4713% APY
Daily (365x)10.5156% APY

In traditional finance, the difference between compounding frequencies is modest. In DeFi, however, with rates often exceeding 20-100%+, the compounding effect becomes much more significant.

DeFi Yield Farming Considerations

When evaluating DeFi yields, remember that displayed APY assumes auto-compounding. If rewards are not automatically reinvested, you are effectively earning APR, not APY. Manual compounding incurs gas fees which can significantly reduce net returns, especially on Ethereum mainnet.

Many protocols use auto-compounders (vaults like Yearn, Beefy, or Convex) that reinvest rewards on your behalf, amortizing gas costs across all vault depositors. These typically compound anywhere from once per day to multiple times per hour.

Always compare yields on an APR basis when auto-compounding is not available, and factor in gas costs, slippage, and protocol fees.

Real Yield vs Token Emissions

Real yield comes from actual protocol revenue—trading fees, borrowing interest, or liquidation proceeds. This yield is sustainable because it is backed by real economic activity.

Token emissions are inflationary rewards paid in the protocol's native token. While they can boost displayed APY dramatically (sometimes 1,000%+), they dilute the token supply. If the token price declines, your actual return in USD terms can be significantly lower—or even negative.

A protocol offering 8% APY from real fees is generally more attractive long-term than one offering 200% APY from token emissions, unless you have strong conviction the emitted token will appreciate.

Common APY/APR Traps

1. Ignoring impermanent loss: High APY on liquidity pools does not account for impermanent loss (IL). A pool showing 50% APY with 30% IL means your effective return is only ~20%.

2. Unstable rates: DeFi rates are highly variable. A 100% APY today may drop to 5% tomorrow as more capital enters the pool. Advertised rates are snapshots, not guarantees.

3. Lock-up periods: Some protocols require staking locks (30-365 days). High APY is less attractive if you cannot exit when market conditions change.

4. Smart contract risk: Higher yields often come from newer, less audited protocols. A 200% APY means nothing if the protocol gets exploited. Always verify audit reports and consider diversifying across protocols.

5. Confusing APR and APY: Protocols may advertise the higher of the two to appear more attractive. Always confirm which metric is displayed and whether auto-compounding is included.

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Results depend on your inputs and the assumptions shown by this calculator. Reference links explain the model; they do not supply a live price feed. Fees, execution and changing market conditions can affect actual outcomes.

Frequently asked questions

What is the difference between APR and APY?

APR (Annual Percentage Rate) is the simple interest rate without compounding. APY (Annual Percentage Yield) includes the effect of compounding. A 10% APR compounded daily equals 10.52% APY.

How does compounding frequency affect returns?

More frequent compounding yields higher returns. A 12% APR compounded yearly = 12% APY, compounded monthly = 12.68% APY, compounded daily = 12.75% APY. In DeFi, many protocols auto-compound.

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