Annual Effective Rate
See APY (Annual Percentage Yield)
Frequently Asked Questions about Annual Effective Rate
What is the Annual Effective Rate?
The Annual Effective Rate refers to the actual rate of return earned or paid on an investment, taking into account the effect of compounding over a year. It is commonly referred to as APY (Annual Percentage Yield).
Is Annual Effective Rate the same as APY?
Yes. The Annual Effective Rate is another term for APY (Annual Percentage Yield), which reflects the real return on an investment when compounding is considered.
Why is the Annual Effective Rate important in real estate finance?
It provides a more accurate picture of the return or cost associated with a financial product by accounting for the compounding effect, which is essential for evaluating investment performance or financing terms.
Where can I learn more about the Annual Effective Rate and APY?
You can refer to the glossary entries on APY and Annual Percentage Yield, or explore Case Study #11 – Residential Development Business Model: Build And Sell (Case + Solution) for applied financial concepts.
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