---
title: APY vs APR
description: Page on Vedang Vatsa's site: https://veda.ng/glossary/apy-vs-apr
canonical: https://veda.ng/glossary/apy-vs-apr
last_updated: 2026-10-03
type: text/markdown
---
# APY vs APR

Source: https://veda.ng/glossary/apy-vs-apr
Author: Vedang Vatsa (https://veda.ng/about)

APR, Annual Percentage Rate, and APY, Annual Percentage Yield, both describe yearly interest. APR ignores compounding. APY includes it. For the same rate, APY is equal or higher. At 12% APR compounded monthly you earn 1% a month. After a year, (1.01)^12 = 1.1268, so 12.68% APY. Daily compounding at 12% APR is about 12.75% APY. Continuous compounding converges to e^r minus 1.

DeFi usually quotes APY because protocols can compound each block, trade, or epoch. A lending market showing 10% APY means the deposit grows 10% a year with compounding already in the number. Some protocols quote APY with unrealistic compounding or with token emissions that will fall. Check whether the figure is APR or APY and what assumptions sit under it. At 5% APR monthly compounding is 5.12% APY. The gap is small. At 100% APR with daily compounding, APY is 171.5%. Mixing the two when you compare protocols is how you pick the wrong yield. After one year: (1.01)^12 = 1.1268, meaning 12.68% APY. The more frequent the compounding, the larger the gap: 12% APR compounded daily yields 12.75% APY. But beware of manipulation: some protocols quote APY assuming unrealistic compounding frequency or based on token emissions that will decline. Always check whether quoted yields are APR or APY and what assumptions underlie the calculation.

Glossary index: https://veda.ng/glossary