APR (Annual Percentage Rate) is the annual rate charged for borrowing or earned through an investment without taking compounding into account. APY (Annual Percentage Yield) does account for compounding. For example, a 5% APR compounded monthly becomes a 5.12% APY. In the USA, lenders must disclose APR, while banks must disclose APY for savings products.

When the Federal Reserve raises the federal funds rate, banks typically increase the interest rates they offer on savings accounts, CDs, and other deposit products. Conversely, when the Fed lowers rates, savings rates usually fall. However, the relationship isn't always one-to-one, and banks may adjust rates at different speeds.

Yes, interest earned from bank accounts, CDs, and most investments is generally taxable as ordinary income at both federal and state levels. You'll receive a Form 1099-INT from your financial institution if you earn more than $10 in interest during the tax year. There are exceptions for certain accounts like Roth IRAs and municipal bonds.

Simple interest is calculated only on the principal amount. Compound interest is calculated on the principal plus accumulated interest. For example, $10,000 at 5% simple interest earns $500 each year. At compound interest (compounded annually), it earns $500 the first year, $525 the second year (5% of $10,500), and so on. Compound interest yields higher returns over time.

As of 2023, average rates in the USA are: Savings accounts (0.5% APY), 1-year CDs (1.5% APY), 30-year fixed mortgage (7% APR), 15-year fixed mortgage (6.3% APR), Auto loans (5% APR for new cars), Personal loans (11% APR). These rates fluctuate based on Federal Reserve policy and economic conditions.