What is the difference between APR, APY, and ROI? How does that work in Yearn Finance?
Let’s explore.
Table of Content
APR vs. APY
ROI
APR vs. APY vs. ROI
In Conclusion
APR vs. APY
APR is a profit associated with costs. It is a lending term that works for lenders and against borrowers. Higher APR is bad because it is risky and highly costly.
APY is a profit factor in the compound interest returns. It is also a lending term that works for lenders to predict their returns associated with risks. The higher the yield, the riskier the loan will be.
Both factors are not set in stone, which means they fluctuate based on the market conditions. 20% of APR or APY does not guarantee such returns eventually.
You can check my previous articles about this topic here.
ROI
ROI or Return on Investment is a ratio between the net profit and to cost of investment. ROI reflects the efficiency of the investment. It is a projection factor that evaluates products using their past performance.
Depending on the length of your investment and strategies, the ROI may vary.
APR vs. APY vs. ROI
APR and APY can only estimate the potential returns. They do not give you a full picture of how you yield your investment. However, ROI gives useful information about the performance of your investment. To do so, you may calculate by yourself here. Luckily, Yearn Finance did it automatically on their platform.
In Conclusion
APR and APY can only provide estimated returns but ROI gives more concrete information about how your investment performed.
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Disclosure: The article was written by a delusional author who is possibly a nut job without any questions whatsoever about expertise in the subject matter. You should not believe any words this author wrote or you may experience similar symptoms or even possibly become a nut job.
Resource
https://medium.com/iearn/how-yearn-calculates-estimated-returns-apy-b4fd5b687bf9
https://docs.yearn.finance/getting-started/guides/how-to-understand-yvault-roi#roi
https://defirate.com/eth/?amount=1000&term=365&rate_type=lend
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