Annual Percentage Yield (APY)

APY, or annual percentage yield, is the return an investment earns over a year once compounding is included. Compounding means the income you earn itself earns income - so APY is always equal to or higher than the simple interest rate it comes from, and it is the figure that lets you compare two products on equal terms.

The difference is the compounding frequency. A 5% nominal rate compounded daily works out to about 5.13% APY; compounded monthly it is closer to 5.12%. The more often interest is added to the balance, the more the APY pulls ahead of the headline rate.

APY differs from a plain yield quote, which may report only the income rate and ignore reinvestment. It also differs from APR (annual percentage rate), a non-compounded annualized rate often used for the cost of borrowing. When you see APY, assume compounding is baked in.

In tokenized assets, APY usually describes how fast your position grows if income accrues or is reinvested. A tokenized Treasury product tracking short-term US rates might show an APY near 4-5% through 2024-2025, while a DeFi lending pool holding a stablecoin like USDC might quote a variable APY that moves with demand to borrow.

Treat any APY as a snapshot, not a guarantee. A variable APY can change block to block as rates, utilization, or fees shift, and a quoted APY often assumes you reinvest every payout, which you may not. Check whether the number is fixed or variable and whether it is shown net of fees.

Source: rwa.xyz, as of 2026.