Question

When is annual percentage rate equal to annual percentage yield?

Answer 1

The annual percentage yield (APY) is the interest yield that we get on a balance held for one year in a financial product, taking compounding into account . While the annual percentage rate (APR) is also known as the nominal interest rate . It is the rate of interest in one year, without taking compounding into account .

Let us see the relationship between two :

APY = ( 1 + APR / m ) ^m - 1

m = compounding periods .

So when m = 1 ( only a single compounding period )

APY = ( 1 + APR / 1 ) ¹ - 1 = 1 + APR - 1 = APR