Annual Percentage Yield (APY) expresses an annual rate of interest taking into account the effect of compounding, usually for deposit or investment products (such as a certificate of deposit). It is analogous to the Annual percentage rate (APR), which is used for loans.

In some jurisdictions, the use and definition of annual percentage yield may be regulated by a government agency, in which case it would generally be capitalized.

The annual percentage yield is generally used to refer to the rate paid to a depositor or lender by a financial institution, whereas annual percentage rate refers to the rate paid to a financial institution by a borrower.

Since the yield is to the lender, however, perspective may lead to confusion about the term: for example, a banker (as lender) may refer to the yield on the bank's loan portfolio, whereas borrowers would refer to the interest rate on their loans from the bank. Similarly, borrowers from a bank may refer to the yield on their deposits, while the bank refers to the rate paid on their deposit accounts.

Get more information on Annual Percentage Yield in the Real Estate Forum