# APY Calculations Methodology

There are so many ways to calculate projected APY, after all estimating the future is hard! In this post we will briefly go over our methodology for calculating APYs.

### Upcoming Vaults

To calculate the APY for upcoming vaults we take the previous 7 day yield and extrapolate that for the duration of the vault.

We calculate the daily yield from fees. In the case below it would be 0.0025 given the 0.25% trading fee earned by SUSHI LPs.

We calculate the daily rewards yield

We take the yield daily from the fees and rewards and then calculate the 7 day compounded todal.

Why use 7 days? We know that these fees and rewards can vary quite a bit day to day, so we would not want to use something like 1 days since that would cause large changes in displayed APY. We also don’t want to use too long a period such as a month since that could incorporate yields that are significantly different than current rates.

This yield over the last 7 days is then extrapolated for the duration of the vault to determine the combined returns of the vault.

We then split the returns into the Fixed and Variable Yield Components.

Finally in order to calculate the APY from the yield we apply the following formula

This same methodology would be used for Uniswap, except that the rewards there would be zero. Also the trading fee would be 0.30% instead of the 0.25%.

### Active Vaults

For active vaults the calculation is a bit more complicated. We want to take the existing returns for the vault so far, and then also project out the future fee and reward yields.

Reward returns are calculated using the rewards for the vault so far, and then extrapolated for the duration of the vault.

Remaining fees are calculated assuming the fee yield since vault start are constant for the remaining duration.

Calculate LP returns since the vault started.

Finally, we compound these three return components together to get the total returns for the vault.

We then split them into the fixed and variable components in terms of the underlying token. Since the token prices for the fixed and variable assets have likely changed since the beginning of the vault we will have to account for that in the yield calculations.

Now that we have the yield in the underlying token we can then calculate the APY values given these returns as per the formula.

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