I’d like to know how they’re different. Thanks
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Interest is the fixed rate that is being paid on money.
Annual Percentage Yield is the actual earnings you’ll make on that money.
Interest rate is the flat amount of interest you are earning.
APY – annual percentage yield, which is the amount you are really earning if you reinvest what you earned in interest.
Example, suppose you invest $100 and get 2% interest (or APR – annual percentage rate).
You may get paid monthly, which is a fraction of this 2%.
If you keep your money in your account, including the interest earned, you are earning interest on that interest (compounding), which is your Annual Percentage Yield (APY).
APY = your REAL earnings, total, if you never withdraw from your savings account.