> For the complete documentation index, see [llms.txt](https://financekyrios.gitbook.io/kyrios-finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://financekyrios.gitbook.io/kyrios-finance/knowledge/understanding-apr-and-apy.md).

# Understanding APR and APY

## What is APR? <a href="#b36a" id="b36a"></a>

APR is an abbreviation for annual percentage rate, which means yearly funds that you get as investment interest. This usually includes any additional costs or fees you have to pay along the way but does not incorporate compounding.

The essence of APR is a simple interest rate, so your profit depends directly on the original investment.

Here’s how you can calculate simple interest: S.I =&#x20;

$$
S.I = P*R*T/100
$$

*P — principal investment*

*R — rate of interest (yearly)  but you can adjust it.*

*T — time (usually, number of years)*

## What is APY?

APY stands for annual percentage yield, which is the actual rate of return earned on an investment, considering the compound interest.

Compound interest, in contrast to the simple one, allows investors to get interest on interest, adding their profit to the initial sum of investment. For instance, in the DeFi world, you can get the rewards for staking and add them to the overall staked coins so that you receive higher profit next time.

Here’s a formula to calculate APY:

$$
APY = (1 + r/n^n) -1
$$

Being r the period rate and n the number of compounding periods.

{% hint style="info" %}
Please do you calculations taking in consideration the **time** you'll lend the assets
{% endhint %}