What is the difference between APR and APY?

Difference APR and APY

The amount of interest in Defi Wallets is often stated in APY, or APR.

What is APR?

APR is the abbreviation for Annual Percentage Rate, so it means nothing more than the interest rate. So if I have $1,000 in my account and it states that there is 12% interest, then there is $120 in the year, so $10 a month. If I withdraw that $10 and leave $1000 in the account, I will get $10 again the next month. It is easier to do the math with the APR statement. Here I can quickly see how much interest I get in a year, month, day, etc. If I want to know how much interest I get per day, I just divide the percentage by 365.

What is APY?

APY stands for Annual Percentage Yield. Sounds similar but it is not. If both numbers are given in a wallet, then APY will have a higher interest rate than APR. Assuming I cash out my interest daily and keep the amount in the account, the earnings will include interest.
If I have $1,000 and there is 1% interest, so $10 a day and it would be reinvested daily, I would not have earned $3,650 after one year, but $3,778.34. If the interest rate was stated in APR, it would say 365%, if it was stated in APY it would say 377.83%.

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