What does APY stand for in banking?

APY stands for Annual Percentage Yield, which is a critical metric in banking that represents the actual rate of return on an investment or savings account over a year, taking into account the effect of compounding interest. This allows consumers to understand how much they can expect to earn from their deposits if they keep their money in the account for a full year. The use of "Percentage" in the definition highlights that APY is expressed as a percentage, making it easier for consumers to compare different savings accounts and investment products.

APY is particularly important in helping consumers make informed decisions about where to save or invest their money, as it reflects not only the interest rate offered but also how frequently interest is compounded. Understanding APY can guide individuals in selecting financial products that align with their savings goals. Other terms offered in the choices, such as Annual Payment Yield, Asset Profit Yield, and Aggregate Payment Yield, do not accurately describe the standardized calculation of interest earnings that APY represents in the context of banking.