Given the amount of confusion surrounding the concept of APY, APR, and compound interest Yield Yak has enlisted its experienced compounders and offered their inciteful Yak Guides to shed some light on the concepts.
Yield Yak’s strategies efficiently and effectively compound your investments, meaning each time you receive a reward from a farm, Yield Yak automatically exchanges those rewards for the base token you are farming them with and then adds those tokens to your position. So each time you are rewarded it will be from a higher base amount. As this process is repeated, it generates growth that excels over time; compound Interest.
When it comes to APR and APY most farmers are used to viewing things in terms of APR as a majority of farms do not compound your rewards. APY however shows you the full return of your investment with compounding.
To Calculate APY from APR, follow these steps
- Divide APR by 100 and by 365 to know the daily return (assuming a daily reinvestment)
- Add 1 to the result
- Raise the result to the power of 365 (assuming a daily reinvestment)
- Subtract 1 from the result
- Multiply by 100 and that’s your APY!
Yield Yak displays returns in APY as their strategies compound deposits, but also list the APR of each strategy by visiting the detail page.