What are the differences between APR and APY in the context of digital assets?

3 answers

• Dec 18, 2021 · 3 years ago
  APR and APY are both important concepts when it comes to understanding the returns on investments in the digital asset space. APR represents the simple interest rate that is earned on an investment over a year, while APY takes into account the compounding of interest. In simple terms, APR is the nominal rate, while APY is the effective rate. When investing in digital assets, it's important to consider both APR and APY to get a clear picture of the potential returns on your investment.
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• Dec 18, 2021 · 3 years ago
  Imagine you have $1,000 invested in a digital asset with an APR of 5%. At the end of the year, you would earn $50 in interest. However, if the interest is compounded monthly, the APY would be slightly higher due to the compounding effect. This means that the actual return on your investment would be slightly higher than the APR. So, APY gives you a more accurate representation of the returns you can expect from your investment in digital assets.
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• Dec 18, 2021 · 3 years ago
  BYDFi, a leading digital asset exchange, explains that APR and APY are crucial in understanding the potential returns on investments in the digital asset space. APR is the annual interest rate without considering compounding, while APY takes into account the compounding effect. It's important to note that the compounding frequency can significantly impact the actual returns on your investment. Therefore, it's essential to carefully analyze both APR and APY when evaluating investment opportunities in the digital asset market.
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