# The difference between APR and APY The Annual Percentage Rate (APR) represents the current interest rate for your capital. The Annual Percentage Yield (APY) takes into account the compounding interest and is the resulting interest rate after a full year. In other words, APY factors in the interest that is added to your total balance over time. For example, let’s consider that: * APR is 5% for a $10,000 investment. * The interest is compounded every block or second for most of these services. * In a year, you would have earned $512.71, not $500, because the interest that compounds each block is based on the current balance at the time, factoring in the already compounded interest. * Thus the APY ends up being 5.12% *** ## Related Articles: * [Smart Savings](https://help.defisaver.com/features/smart-savings) * [Use-case](https://help.defisaver.com/features/smart-savings/use-case) --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://help.defisaver.com/features/smart-savings/the-difference-between-apr-and-apy.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.