# APY and APR Calculations

Venzo provides clear distinctions between Annual Percentage Rate (APR) and Annual Percentage Yield (APY) to ensure users fully understand their potential returns.

**APR (Annual Percentage Rate)** represents the simple interest rate earned over a year, without accounting for the effect of compounding. It is calculated as:

$$
APR = (Total Interest Earned / Principal) \* (365 / Days Invested)
$$

**APY (Annual Percentage Yield)** represents the actual rate of return earned over a year, taking into account the effect of compounding interest. It is calculated as:

$$
APY = (1 + r/n)^n - 1
$$

where *`r`* is the periodic interest rate and `n` is the number of compounding periods per year.

Because Venzo Earn vaults typically auto-compound yields (reinvesting earnings back into the principal), the APY will generally be higher than the APR. All displayed APYs on the Venzo dashboard are net of management fees and are calculated based on trailing 7-day or 30-day performance windows.

It is important to note that APY is a dynamic metric that fluctuates based on market conditions, strategy performance, and the utilization rate of the underlying assets. Historical APY is not a guarantee of future performance.


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