How to Calculate Annual Yield

Banks use average annual yields when calculating interest on accounts.

By calculating the annual percent yield of your investments, you can find out how much you're earning over time. The formula to calculate the annual percent yield is: APY = (1 + r/n )^n -- 1. In this formula, r is the annual interest rate, and n is the number of times the investment will compound interest each year. Instead of calculating the annual percent yield by hand, you can also just plug your numbers into an online APY calculator and get the same result.

Instructions

1. Go to an online APY calculator. Three website choices are Bank of Internet, APY Calculator and Bankrate.

2. Fill in the required data. You'll need to enter the principal amount (deposit), interest rate, number of months (12 in this case), and how the interest is compounded on your account. For an example, say your account has $10,000, earns 2.5 percent interest and the interest is compounded daily. You'd enter 10,000 in the principal/deposit field, 2.5 in the interest rate field, 12 for the number of months and indicate that the interest is compounded daily.

3. Click to calculate and receive your annual percentage yield rate. The rate for the above example would be an annual percentage yield of 2.53 percent. Also, the ending balance on the account would be $10,253.14.

References

• University of Arizona: Compound Interest and APY

Resources

• Bank of Internet: Interest Calculator
• APY Calculator: APY Calculator
• Bankrate: CD Calculator