People often see APY and APR on bank pages and credit offers and treat them like synonyms — that’s where confusion starts. APY stands for Annual Percentage Yield and reflects how much you’ll actually earn in a year after compounding; APR (Annual Percentage Rate) is typically used for borrowing and shows interest without compounding (or with different fee treatment). Historically, regulators pushed for these standardized labels so consumers could compare offers more easily, but behaviorally, customers focus on headlines (e.g., “5%”) and miss whether compounding changes take-home outcomes. For savers, APY is the relevant number because it tells you the actual return you’ll get when interest compounds daily, monthly, or quarterly. For borrowers, APR helps compare loan costs but can understate compounding on certain products. This question tests that precise definition so you can pick the right figure to compare savings accounts or certificates.