APY Calculator (Effective Annual Rate)
When a bank advertises 7.2% a year on a VND deposit, that headline is usually the nominal rate — and it does not tell you exactly what you will earn. The reason is compounding: if interest is credited several times a year (monthly, quarterly or daily), each payment is added to your balance and then earns interest of its own. The rate that captures what you actually receive is the annual percentage yield (APY), also called the effective annual rate (EAR).
The formula is short: APY = (1 + r/n)^n − 1, where r is the nominal annual rate and n is the number of compounding periods per year. At 7.2% nominal compounded monthly (n = 12), the APY is 7.44% — higher than the nominal rate by 0.242%. That gap looks tiny, but on a 100.000.000 VND deposit it means 7.442.417 VND of interest in a year, taking the balance to 107.442.417 VND — 242.417 VND more than a deposit that pays interest just once at year-end.
The calculator above lets you enter the nominal rate, pick how many times a year interest compounds (1 / 4 / 12 / 365) and set the principal, then it returns the APY, the interest earned over one year, and the gap between APY and the nominal rate. This is the only fair way to compare two VND deposits with different compounding schedules: a bank quoting 7.2% compounded monthly can genuinely beat one quoting the same 7.2% paid only at maturity. Note that 7.2% here is an illustrative figure, not any bank's current rate — enter the rate and frequency on your own contract.
How the calculator converts nominal to effective
From a quoted rate to what you actually earn
APY collapses a nominal rate plus its compounding schedule into a single number that reflects the true 12-month return:
APY = (1 + r / n)^n − 1
| Symbol | Meaning |
|---|---|
| APY | Effective annual yield over the full year |
| r | Nominal annual rate as a decimal (7.2% = 0.072) |
| n | Compounding periods per year (1 yearly, 4 quarterly, 12 monthly, 365 daily) |
Each period the balance is multiplied by (1 + r/n); after n periods that compounds to (1 + r/n)^n. Subtract 1 and you have the net yearly growth, which is the APY. One-year interest = principal × APY, and the year-end balance = principal × (1 + APY) — exactly what the tool computes, so every figure in the table reconciles.
Why more frequent compounding raises the APY
- Annual (n = 1): interest is paid once, so the APY equals the nominal rate, 7.20%.
- Quarterly (n = 4): APY 7.40%.
- Monthly (n = 12): APY 7.44%.
- Daily (n = 365): APY 7.46%.
More frequent compounding raises the APY, but with diminishing returns — it approaches a ceiling (continuous compounding, e^r − 1). So moving from year-end payment to monthly compounding matters; moving from monthly to daily barely registers.
What the model leaves out
The calculator assumes a constant rate for the whole year and no mid-term withdrawal. It reports the pure effective rate before tax or fees. Helpfully for savers, under current Vietnamese rules interest on personal savings deposits at a credit institution is exempt from personal income tax, so the APY here is close to what you take home. For bonds, certificates of deposit and other taxable instruments, the after-tax return will be below the modelled APY.
Worked example: 100.000.000 VND at 7.2% nominal
Illustrative assumptions: a constant 7.2%/year nominal rate, no withdrawal during the year, and no taxes or fees. The table compares the same deposit under four compounding schedules.
| Compounding | Periods/year (n) | APY (effective) | Interest in 1 year on 100.000.000 VND |
|---|---|---|---|
| Annual | 1 | 7.20% | 7.200.000 |
| Quarterly | 4 | 7.40% | 7.396.743 |
| Monthly | 12 | 7.44% | 7.442.417 |
| Daily | 365 | 7.46% | 7.464.771 |
Three takeaways.
- Monthly compounding beats year-end payment. At the same 7.2% nominal rate, the monthly account yields 7.44% and pays 7.442.417 VND in interest — 242.417 VND more than the account that pays once at year-end. The APY gap is 0.242%.
- Compounding even more often adds little. Going from monthly to daily nudges the APY only from 7.44% to 7.46%; the extra interest over year-end payment tops out at 264.771 VND. Don't let a "daily compounding" pitch distract you from the actual nominal rate.
- Compare on APY, never on the nominal rate. Two accounts both quoting 7.2% but compounding differently pay different amounts. Converting to APY is the only fair comparison.
Enter the rate and compounding frequency from your own contract, then line up the APY across banks before opening an account. To see a deposit grow over several years, pair this with FiMo's compound interest and term deposit calculators.
Frequently asked questions
What is APY and how does it differ from the nominal rate?
APY (annual percentage yield) is the effective yearly rate — what you actually earn once interest compounds several times a year. The nominal rate is the advertised headline that ignores that compounding. At 7.2% nominal compounded monthly, the APY is 7.44%, higher than nominal by 0.242%. When comparing deposits, always convert to APY for a fair comparison.
What is the APY formula?
APY = (1 + r/n)^n − 1, where r is the nominal annual rate as a decimal and n is the number of compounding periods per year (1 = annual, 4 = quarterly, 12 = monthly, 365 = daily). For example, r = 0.072 and n = 12 give APY = (1 + 0.072/12)^12 − 1 = 7.44%. One-year interest = principal × APY; year-end balance = principal × (1 + APY). That is exactly what the calculator above computes.
How much interest does 100 million VND earn in a year at 7.2%?
It depends on the compounding frequency. On 100.000.000 VND at 7.2% nominal: paid once at year-end you earn 7.200.000 VND; compounded monthly you earn 7.442.417 VND (balance 107.442.417 VND); compounded daily you earn 7.464.771 VND. The difference between monthly and year-end payment is 242.417 VND — that is the interest-on-interest you gain within the year.
Is daily compounding much better than monthly?
Not by much. More frequent compounding raises the APY but with diminishing returns, approaching a ceiling (continuous compounding). At 7.2% nominal, monthly compounding yields 7.44% and daily only 7.46%. On 100.000.000 VND, the extra interest over year-end payment rises only from 242.417 VND (monthly) to 264.771 VND (daily). The nominal rate and term matter far more than the compounding frequency.
Is interest on savings deposits taxed in Vietnam?
Under current rules, interest on personal savings deposits at a licensed credit institution is exempt from personal income tax in Vietnam. So the APY this tool reports is close to what you actually take home. The exception: income from bonds, certificates of deposit, or savings placed outside a credit institution can be taxable, in which case the after-tax return falls below the modelled APY. Confirm the treatment for your specific product.
How do I compare two deposits with different rates fairly?
Don't compare nominal rates directly when the compounding schedules differ. Convert each deposit to its APY first. For instance, account A at 7.2% compounded monthly yields 7.44%; if account B also quotes 7.2% but pays only at year-end, its APY is just 7.20%. On the same 100.000.000 VND, account A pays 242.417 VND more per year. Enter each account's rate and frequency into the tool to get comparable numbers.