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Hello everyone, hope you all are doing good? I'm back with the Part 7 of this amazing series, *Understanding CeFi, DeFi & Yield Farming.* If you haven't read the Part 1, Part 2, Part 3, Part 4, Part 5 and Part 6, I strongly suggest you that by clicking [here](https://steemit.com/hive-175254/@menoski/understanding-cefi-defi-and-yield-farming) for Part 1, [here](https://steemit.com/hive-175254/@menoski/understanding-cefi-defi-and-yield-farming-part-2) for Part 2, [here](https://steemit.com/hive-175254/@menoski/understanding-cefi-defi-and-yield-farming-part-3) for Part 3, [here](https://steemit.com/hive-175254/@menoski/understanding-cefi-defi-and-yield-farming-part-4) for Part 4, [here](https://steemit.com/hive-175254/@menoski/understanding-cefi-defi-and-yield-farming-part-5) for Part 5 and [here](https://steemit.com/hive-175254/@menoski/understanding-cefi-defi-and-yield-farming-part-6) for Part 6. In today's article we would be looking at the Calculation method in Yield Farming Returns.

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<center>![yield-farming.jpg](https://files.peakd.com/file/peakd-hive/menoski/242sBngLjW9wZqUdSV36c3QAPYzNRpRLSAdm5HgNBw7Zp3SjpKaK5nKo7kwQ93XgU6tMk.jpg)</center>

<center>[Source](https://www.cryptosarge.com/yield-farming/)</center>
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There are two ways in which our returns from yield farming can be calculated and they are;

+ **APR**
+ **APY**

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<center><h5>APR</h5></center>

Annual Percentage Rate(APR) is the annual returns on investment without the inclusion of compounding interest. I will use an example to illustrate how it can be calculated.

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***Example:*** *I staked some of my BAKE which was worth about $200 with an APR of 40%. How much will I get after one year from my investment?*

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Initial Investment = $200
APR = 40%

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My profit will be = 40% X $200

Profit = **$80**

Total Returns after a year = Initial Investment($200) + Profit($80) 

Total Returns to be withdrawn after a year = **$280**

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<center><h5>APY</h5></center>

Annual Percentage Yield(APY) is the annual returns on investment with the inclusion of compounding interest. I will use the same example from above to illustrate how it can be calculated.

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***Example:*** *I staked some of my BAKE which was worth about $200 with an APR of 40%. How much will I get after one year from my investment?*

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Initial Investment = $200
APR = 40%

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Profit = ((1 + r/n)<sup>n</sup> - 1) X Investment .
Where r = compounding period - i.e (40%)
n = number of days - i.e (365 days)
Investment = $200

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((1 + 0.4/365)<sup>365</sup> - 1) X $200

((1 + 0.001096)<sup>365</sup> - 1) X $200

((1.001096)<sup>365</sup> - 1) X $200

((1.492) - 1) X $200

(0.492) X $200

Profit = **$98.4**

Total Returns after a year = Initial Investment($200) + Profit($98.4) 

Total Returns to be withdrawn after a year = **$298.4**

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<center>![what-is-yield-farming.png](https://files.peakd.com/file/peakd-hive/menoski/48fsG3raXRXmhymDiR1jFtCR7dN1pDJVsDiHGM5myxEQXaCgfppYBDM2d4z9cDeTjc.png)</center>

<center>[Source](https://pixelplex.io/blog/what-is-yield-farming/)</center>
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I hope you all found the article interesting and exciting. Do well to share your thoughts about the article in the comment section below. Thanks.



<center>![HNWT6DgoBc14riaEeLCzGYopkqYBKxpGKqfNWfgr368M9Wj16sy9L2FLoMKzyyDvhGzkw7di9PwELb1KmcWjTry3LS37ofeg3FYBxijjJ5BqZCyybeD3nMxmJzA.png](https://files.peakd.com/file/peakd-hive/menoski/X4mfpd5h-HNWT6DgoBc14riaEeLCzGYopkqYBKxpGKqfNWfgr368M9Wj16sy9L2FLoMKzyyDvhGzkw7di9PwELb1KmcWjTry3LS37ofeg3FYBxijjJ5BqZCyybeD3nMxmJzA.png)</center>


<center>⚫️⚪️⚫️</center>

<center><h3>Thanks For Reading</h3></center>

<center><h3>Till Next Time, Stay Safe</h3></center>


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