# APY Calculation

## What is APY?

**APY** stands for annual percentage yield. It measures the real rate of return on your principal by taking into account the effect of compounding interest. In the case of $LIFE, your staked **$LIFE** represents your principal, and the compound interest is added periodically on every epoch (8 hours) thanks to the rebase mechanism.

One interesting fact about **APY** is that your balance will grow not linearly but exponentially over time! Assuming a daily compound interest of 2%, if you start with a balance of 1 **$LIFE** on day 1, after a year, your balance will grow to about 1377.

![](https://2462556833-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F1xTv6nRYvAqoVkmvjfzY%2Fuploads%2FHkMNkUJa4BzTzTcMmgAe%2Fbalance_calculation_APY.PNG?alt=media\&token=3a6b838a-8da6-4d9f-8e02-32f4733b583c)

## How is APY calculated ?

&#x20;The APY is calculated from the reward yield (a.k.a rebase rate) using the following equation:

$$
APY=( 1+RewardYield)^{1095}
$$

It raises to the power of 1095 because a rebase happens 3 times daily. Consider there are 365 days in a year, this would give a rebase frequency of 365 \* 3 = 1095.

Reward yield is determined by the following equation:

$$
rewardYield=$Lifedistributed
$$

The number of **$LIFE** distributed to the staking contract is calculated from **$LIFE** total supply using the following equation:

$$
rewardRate$LIFE\_{distributed} = $LIFE\_ {totalSupply} \times rewardRate
$$

Note that the reward rate is subject to change by the protocol.
