Annual Percentage Rate (APR)

Share
Reading Time: < 1 minute

APR is an annual interest rate offered to lenders who lend their tokens or crypto assets for borrowers to access at investment companies or cryptocurrency exchanges. APR is different from Annual Percentage Yield (APY) because it doesn’t take into account compound interest. APR is a static metric because it’s quoted as a fixed yearly rate.

Therefore, interest is applied pro-rata if a loan or investment is held for less than a year. For instance, a six-month investment will yield you exactly half the interest, or three percent, on your principal.

The basic formula for calculating APR is pretty straightforward: A= [Px(1+RxT)].

A is the total fine amount, then P is the principal or the initial investment. While R represents the interest rate used and T represents time in years.

Explore Other Vocabulary ‚Üí