Tip of the Week: APY Confusion on Fiserv Premier

Source: Bank email question. Peak Consulting gets questions from clients we’ve worked with or people that come across our name. (Feel free to reach out with questions) Take a look at our tip of the week:

Question/Issue: A loan was booked with a 4.75% fixed rate however the Annual Percentage Yield (APY) is much lower at 1.75%. What would cause the much lower yield?

Answer: In this case, the issue was with a large Deferred Cost amount being spread over a 6 month maturity. Keep in mind that the APY is designed to give a truer picture of the actual rate of return. In order to accomplish this, the APY calculation takes financed fees, deferred fees, and deferred cost into the equation.