Annual Percentage Yield (APY)
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What is Annual Percentage Yield?
The annual percentage yield (APY) is the true rate of return on an investment that takes compounding interest into account. Compounding interest, as opposed to simple interest, is calculated on a regular basis and the amount is immediately added to the balance. With each passing period, the account balance becomes a little more, and so the interest paid on the balance grows as well.
Understanding Annual Percentage Yield
The annualized rate of return on an investment (APY) takes into account compound interest that accrues or grows with the balance. Compound interest covers both the interest gained on the initial deposit and the interest earned on the interest earned on the interest.
Although generally linked with traditional savings, APY is an important measure for crypto savings schemes and functions in a similar manner. Crypto investors can earn APY on their coins by staking them, storing them in savings accounts, or giving liquidity to liquidity pools through yield farming.
You may earn APY on your bitcoin quickly by using cryptocurrency exchanges, wallets, and DeFi protocols.In most cases, investors will earn interest in the same cryptocurrency in which they deposited. However, in some cases, they can be paid in the same or a separate currency.
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