APY stands for Annual Percentage Yield. It's a standardized way to represent the annualized rate of return or interest earned on an investment, particularly in the context of financial products like savings accounts, loans, or investments.

APY takes into account compound interest, which means it considers not only the initial interest but also the interest accrued on the interest, assuming that the earnings are reinvested or added back to the principal balance. This makes APY higher than simple interest rates.

For example, if you invest in a savings account with an APY of 5%, compounded annually, it means that after one year, your account balance will have increased by 5% of the initial balance, including the interest earned.