Pyrus APY Scanner?
Pyrus APY Scanner (P-APY) Annual Percentage Yield (APY)
The annual percentage yield (APY) is the actual rate of return on an investment after considering the impact of compounding interest. Compounding interest, as opposed to simple interest, is computed regularly, and the amount is instantly added to the balance. With each passing month, the account balance grows slightly, and therefore the interest paid on the amount grows as well.
How the Pyrus APY Scanner calculates APY
The annual percentage yield (APY) standardizes the rate of return. This is accomplished by expressing the actual percentage of growth generated in compound interest if the money is deposited for a year. The APY formula is as follows:
APY = (1 + r / n) n
1 Where ‘r’ represents the interest rate and ‘n’ denotes the number of compounding cycles.
An example would better demonstrate the APY calculation. If a user deposits $100 for one year at an interest rate of 5% with quarterly compounding, at the end of the year, the user would have $105.09.
So, the APY = (1 + 0.05/4) - 1 = 0.05095 = 5.095%
The beauty of the APY is that it adds up the interests earned in each compounding cycle to the principal amount. If the user leaves that $100 investment for four years, at the same terms, that initial deposit will grow to $121.99 after four years. Mathematically
X = D (((1 + r / n) n
y) = $100 (((1 + 0.05 / 4) 4
= $100 (1.21989) = $121.99
= $100 (1.21989) = $121.99
Where, X = Final amount, D = Initial deposit, r = period rate, n = number of compounding cycles per year, and y = number of years.
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