> For the complete documentation index, see [llms.txt](https://alembic.gitbook.io/alembic-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://alembic.gitbook.io/alembic-docs/introduction/getting-started/user-guide/fees-and-rewards/apy-calculation-explained.md).

# APY Calculation Explained

**APY (Annual Percentage Yield)** represents the **annualized rate of return** earned from a given vault, including compounding effects over time.

#### **How Alembic Calculates APY**

1. **Track Real-Time Performance:** Smart contracts monitor rewards generated by the vault continuously.
2. **Annualize the Return:** The system extrapolates short-term performance (e.g., daily or weekly yield) into an annual rate.
3. **Display Dynamic Results:** APY is updated in real-time based on actual strategy performance and market data.

> *Formula:*\
> **APY = (1 + r/n)ⁿ – 1**\
> where *r* is the periodic yield rate and *n* is the number of compounding periods per year.

#### **Important Notes**

* **APY is indicative, not fixed.** Returns fluctuate depending on token prices, rewards, and network conditions.
* **Auto-compounding vaults** may achieve higher effective APY through reinvestment of rewards.
* **Historical data** is available within the dashboard for transparency and performance tracking.


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