# What is the difference between APY and APR?

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You may have heard of APY (Annual Percentage Yield) and APR (Annual Percentage Rate), two of the most widely-recognized terms in crypto.

Both APY and APR are used to calculate interest on investment; however, having deep-understandings on how they work and differ from each other would significantly affect how much you will earn with your crypto assets.

The difference between APY and APR

Here is a cheat sheet about APY/APR and their main differences:

All these texts would be worthless without a good example. Let's say Clark has a good $1,000 initial investment. An investment product offered him 6% interest every 6-month.

Without compound impacts, the product's APR = 12% with a simple formula: 6% x 2 halves of the year = 12%. Clark will receive a nice $1,000 x 12% = $120 return for his investment with APR = 12%

With compound impacts, it gets trickier. For the first half of the year, Clark receives $1,000 x 6% = $60, which later gets reinvested, making the principal bigger at $1,060. At the end of the year, Clark receives $1,060 x 6% = $63.6. Totally, Clark’s annual return is $60 + $63.6 = $123.6. This amount constitutes an APY = 12.36% to the principal $1,000. An easier way to calculate APY is using the formula:

**APY = (1 + R/N)^N - 1**Whereas R is the annual rate of return, N is the number of compounding periods.

It can be clearly seen that APY is higher in comparison to APR due to compounding impacts.

Why do we use APR on Baryon?

It is noticeable that all Stake & Farm pools on Baryon use APR as the main interest metrics.

Well, from our point of view, the simpler, the better. A display of extremely high APY can be a double-edged sword, giving a false assumption of the pool.

Why does APR on Baryon change all the time?

**Simple rule**: The more users stake their tokens in Farms, the lower the incentives will be, thus APR & APY will be lowered. The same principle applied to the other way around.

As the deposited amount changes from time to time, the APR will change accordingly.

**APY**

Annual Percentage Yield

**APR**

Annual Percentage Rate

**Definition**

Annual rate of return considering compound interest

Annual rate of return **without** considering compound interest

**Factors**

Return depends on initial investment **and** number of compounding periods

Return depends on initial investment only

**Figures**

APY is higher due to compounding impacts

Without compounding impacts, APR is lower than APY