Effective Annual Yield

Depositor's yield earned on a savings account or time deposit, including compounded interest, assuming the funds remain in the account for a full calendar year. The effective yield of a six-month certificate of deposit, for instance, is the rate earned by the CD over the course of the year, including interest compounding. Effective yield may overstate the yield earned on a six-month CD because the calculation assumes the funds will automatically be reinvested (rolled over) at the original rate.