# mooVaults APY ## What is the APY? Let's look at a typical yield farm, where they state an APY (annual percentage yield) as +100% for example. The traditional definition of APY ***is the real rate of return earned on an investment taking into account the effect of compounding earnings***. Using this terminology would indicate that the yield farm was compounding earnings for you. That is simply not the case. A more applicable terminology to use would be APR (annual percentage rate), meaning the annual rate earned through an investment. By definition this would mean that your 100% yield farm would double your original investment at the end of year 1 without reinvesting any earnings. But what about if you reinvested that entire amount the next year and the year after that? ## Understanding Exponential Growth (Compounding) Growth whose rate becomes ever more rapid in proportion to the growing total number or size. The simple formula for this is ***growth = (1 + r)^x*** , where 'r' = return and 'x' = number of 'times'. For example, your money doubles every year if you get 100% yearly return. After 3 years you would have 8x your original investment. ![growth = (1 + 100%)^3](/files/-MKVLa-DwKHP_7FmIA-T) ## Ok, so what REALLY is the APY? A typical investment does not just pay out on a yearly basis, but in smaller terms (ie: daily, monthly, etc). For yield farming, returns are even paid out on a per block basis. With an average of 28,800 blocks a day and cheap transaction fees this can allow for a significant amount of exponential growth or compounding of your return. Let's look at how to break that down... * Compound = **P \* (1+r/n)^nt** Example : 100 \* (1+1/12)^(12\*1) * P = principal or starting balance * r = APR = 100% * n = compounding periods = 12 months * t = time = 1 year * The simple APY calculation in excel can also be stated as =EFFECT(r, n) ![Year 1 end would be 261 tokens or 161% APY versus 100% APR w/o compounding](/files/-MKVp0rWZYcSdUL4icp6) --- # 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://docs.beefy.finance/faq/moovaults-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.