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What is the difference between APR and APY? : Student Credit Informa.
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2/28/2007 12:01 AM
What is the difference between APR and APY?
For loans or investments that involve compounding interest, there are
two popular interest rate related terms. Annual Percentage Rate, or
APR, is a measure of how much interest will be on an annual basis
without taking into account compound interest. Annual Percentage
Yield, or APY, is the same measure of interest rate, but accounting for
compound interest  a better measure of how much you will pay in
interest. Banks and credit card issuers often express credit card
interest rates in APR, in order to better hide just how much interest
would cost.
Fortunately, calculating APY is relatively simply matter, as is APR.
Here are some examples so that you can calculate APR versus APY:
APR = Period Rate x Periods per Year
Let's say a credit card company offers a 13% interest rate, and they
express that rate in terms of APR with a monthly billing cycle.
13% = Period Rate x 12
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This note was uploaded on 01/05/2012 for the course MATH 1332.S0 taught by Professor Mariselaa.martinez during the Fall '11 term at Collin College.
 Fall '11
 MariselaA.Martinez

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