11-21-2021, 08:31 PM
If you don't already, you need to understand the difference between APR and APY. Oth
<!-- SC_OFF --><div class="md"><p>Return on investments are not expressed by months, weeks or days. They are expressed <em>annually</em>.</p> <p>So when you say, "<em>You can get 2% of APY/month</em>", or "<em>with a 1% interest/week</em>", or "i<em>f you coumpound interest on a 10% APY</em>", then you sound like a fool.</p> <p>There are two different acronym you <em>need</em> to understand.</p> <p><strong>APR</strong> : Annual percentage rate; it's the annual rate of return on an investment, <strong>without any compounding</strong>.</p> <p>It's basically the return you realise by lending (or staking, etc.) an asset after a year, if you do not touch it (no compounding). So, if you invest $100'000 with a 10% APR, you will get a return $10'000 after a year (10%).</p> <p><strong>APY</strong> : Annual percentage yield ; it's rate of return earned on an investment, <strong>taking into account the effect of compounding interest</strong>.</p> <p>It's the return you realise when compounding the interest whenever it's possible to do it. The compounding can take place daily, weekly, monthly, annually. It depends on the terms & conditions of your investment.</p> <p><strong>Compound interest</strong>: it's the fact the interest accrued on your investment is (automatically/manually) added to your investment and start accruing interest as well.</p> <p>An APR where you can compound interest daily is going to be a much higher APY than an APR with monthly coumpounding.</p> <p>Let's take a few examples:</p> <ul> <li>12% APR. That's 12% per year (or 1% per month if you want). So if you invest $100, you get 12$ a year (1$ every month). After a year, you have $112.</li> <li>12% APR allowing you to monthly compound. That's a 12.68% APY. So if you invest $100, you get 1$ the first month (that you coumpound), $1.01 the next month, $1.021 the third, $1.0303 the fourth, and so on.</li> <li>18% APY with a daily compound, is a 16.56% APR.</li> <li>45% APY with monthly compound, is a 37.18% APR.</li> </ul> <p>If you want to understand how to convert your APR to your APY, you can head there: <a href="http://www.aprtoapy.com">www.aprtoapy.com</a>. There are also the mathematical formulas and explanations.</p> <p>I hope that helps some of you to better understand the financial aspects your investments and use the correct terminology, so you don't look and/or sound uneducated.</p> <p>Have a great day!</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/free_my_mind"> /u/free_my_mind </a> <br/> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/qyttdx/if_you_dont_already_you_need_to_understand_the/">[link]</a></span> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/qyttdx/if_you_dont_already_you_need_to_understand_the/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>Return on investments are not expressed by months, weeks or days. They are expressed <em>annually</em>.</p> <p>So when you say, "<em>You can get 2% of APY/month</em>", or "<em>with a 1% interest/week</em>", or "i<em>f you coumpound interest on a 10% APY</em>", then you sound like a fool.</p> <p>There are two different acronym you <em>need</em> to understand.</p> <p><strong>APR</strong> : Annual percentage rate; it's the annual rate of return on an investment, <strong>without any compounding</strong>.</p> <p>It's basically the return you realise by lending (or staking, etc.) an asset after a year, if you do not touch it (no compounding). So, if you invest $100'000 with a 10% APR, you will get a return $10'000 after a year (10%).</p> <p><strong>APY</strong> : Annual percentage yield ; it's rate of return earned on an investment, <strong>taking into account the effect of compounding interest</strong>.</p> <p>It's the return you realise when compounding the interest whenever it's possible to do it. The compounding can take place daily, weekly, monthly, annually. It depends on the terms & conditions of your investment.</p> <p><strong>Compound interest</strong>: it's the fact the interest accrued on your investment is (automatically/manually) added to your investment and start accruing interest as well.</p> <p>An APR where you can compound interest daily is going to be a much higher APY than an APR with monthly coumpounding.</p> <p>Let's take a few examples:</p> <ul> <li>12% APR. That's 12% per year (or 1% per month if you want). So if you invest $100, you get 12$ a year (1$ every month). After a year, you have $112.</li> <li>12% APR allowing you to monthly compound. That's a 12.68% APY. So if you invest $100, you get 1$ the first month (that you coumpound), $1.01 the next month, $1.021 the third, $1.0303 the fourth, and so on.</li> <li>18% APY with a daily compound, is a 16.56% APR.</li> <li>45% APY with monthly compound, is a 37.18% APR.</li> </ul> <p>If you want to understand how to convert your APR to your APY, you can head there: <a href="http://www.aprtoapy.com">www.aprtoapy.com</a>. There are also the mathematical formulas and explanations.</p> <p>I hope that helps some of you to better understand the financial aspects your investments and use the correct terminology, so you don't look and/or sound uneducated.</p> <p>Have a great day!</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/free_my_mind"> /u/free_my_mind </a> <br/> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/qyttdx/if_you_dont_already_you_need_to_understand_the/">[link]</a></span> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/qyttdx/if_you_dont_already_you_need_to_understand_the/">[comments]</a></span>Kind Regards R