Annual Equivalent Rate (AER)
Annual equivalent rate expresses an annualized return after compounding, commonly used to compare savings and deposit products.
Effective annual rate and yield terms used to compare quoted rates after compounding effects.
Effective annual and percentage yield terms show what a quoted rate means over a year after compounding is included.
Use this branch when comparing deposit yields, loan rates, or interest-bearing products that quote nominal rates, APY, AER, or effective annual rates.
| Term | What it compares |
|---|---|
| Annual Equivalent Rate (AER) | An annualized rate that reflects compounding, commonly used for savings-rate comparison in some markets. |
| Annual Percentage Yield (APY) | A U.S. deposit-yield measure that reflects compounding over one year. |
| Effective Annual Rate | The annual rate after compounding effects are included. |
| Nominal vs Effective Rate | The difference between a stated rate and the rate implied after compounding. |
| Label | Watch for |
|---|---|
| Nominal rate | Stated rate before compounding adjustment. |
| Effective annual rate | Annualized rate after compounding. |
| APY or AER | Consumer-facing yield labels that may follow jurisdiction-specific disclosure conventions. |
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Annual equivalent rate expresses an annualized return after compounding, commonly used to compare savings and deposit products.
Annual percentage yield measures the effective annual return on an account after compounding.
The effective annual rate converts a nominal rate with compounding into the actual annualized rate earned or paid.
Comparison of quoted interest rates with rates that reflect compounding over a stated period.