Business Two rates of 10% per year can yield different returns, and the difference can sometimes become hundreds of dollars per position. It all comes down to the three letters before the percentage. APR and APY are being used at every turn in the cryptocurrency space: exchanges advertise APY rates on DeFi platforms, lending services display APR on loans, and the numbers next to these abbreviations look similar, even though they mean different things.
It’s important for investors to understand the difference between APR and APY, if only because platform marketers understand it perfectly well and always highlight whichever metric looks more attractive. So let’s break down what APR and APY are, provide the formulas, calculate examples using real numbers, and show where each metric is appropriate.
