Just like the APR helps to compare the true cost of borrowing, the APY is an even better measure for comparing bank deposit products within and between banks.  The APY, annual percentage yield, is the yield your investment will earn over the term of a year taking into account the effect of compounding.  The percentage rate reflects the total interest that will be earned based on the interest rate and the banks compounding method.  The APY assumes the bank CD deposit or savings deposit and interest earned remains in the account.  For accounts such as CDs, savings, money market accounts with the same posted interest rates, the APY will generally be higher with more frequent compounding periods.  The APR is very similar but measures the cost of credit or the rate on a loan expressed as an annual rate.

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