APR stands for annual percentage rate, and represents the exact rate of interest you'll receive or be charged when you lend or borrow money for a one-year period.

APY stands for annual percentage yield. Yield is not the same as interest rate. Yield is a flat number (expressed as a percentage of the original) that tells you the total amount you can expect to earn from your crypto in a year. For instance, let's say you had 1000 dollars. A 50% APY would mean you earn 500 dollars at the end of one year (50% of 1000 dollars).

Why is this important? Users often mistake APY for APR, or an interest rate. It is not the same as an interest rate, especially when it comes to compounding calculations. APY remains fixed, and already takes into account each compounding interest payment when calculating the total.

In short, APY cannot be used to calculate things like daily interest rates - because they are not the same, and do not apply to the same time period.

Did this answer your question?