APR vs APY, what is the difference?APR stands for
annual percentage rate. It can be considered as an
interest rate generated yearly. For example
1 $ETH investment will generate
0.05 $ETH profit over a year with an
APR of 5%.
APY stands for
annual percentage yield. Unlike the
APR, the
APY includes
compound interest over the investment period. For example,
10% APY (compounded daily) on
1 $ETH will convert it to
1.105 $ETH after one year and into
1.221 $ETH after the next year of compounding.
In conclusion, it’s better to
borrow APR and
lend APY.
#tips
