LeoGlossary: The Difference Between APR and APY

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There is a subtle yet distinct difference between

and .

The first is absent any

. APR is the of money. The lens from which it is viewed is based upon which side of the equation one is looking at.

If one is investing, the APR is the

one receives each year. To flip it, if borrowing it is the paid (the lender enjoys the APR).

With APY, it does include compounding. The return is determined on smaller time frames and paid out. Hence, the APY might include

based upon the monthly interest added in. are this way.

From an

standpoint, the APR might be one number while the APY is slightly higher. This is due to the compounding effects.

General:

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