# Annual Percentage Yield (APY)

The Annual Percentage Yield (APY) dynamically adjusts to reflect the current utilization of our lending services. The APY on Mage Finance comprises several key components:

## Supply APY

This represents the base interest rate earned on supplied assets and varies with the value of the supplied assets.

## Borrow APY

This is the basic interest rate applied to borrowed assets, which increases with the size of the borrowed asset and can sometimes be negative, indicating a situation where interest is paid by borrowers.

## Net APY

The Net APY is calculated as follows:

It can be negative if Borrow(Base) APY doesn't cover the entire yield.

## Example

Suppose a user deposits 1 BTC and borrows an 60% of deposited value in stablecoins on Mage Finance. Let's consider the following rates: Supply APY for BTC: 3%; Borrow APY for stablecoins: 6%.

**Supply Side: **

The user's 1 BTC deposit (assuming 1 BTC = $50,000 for simplicity) earns a base APY of 3%, amounting to $1,500.

**Borrow Side: **

For borrowing 60% of the deposit value in stablecoins ($30,000), the user faces a 6% borrowing APY, which is $1,800.

**Net Earnings and APY Calculation:** Total Supply Earnings: $1,500 Total Borrow Costs: $1,800

**Net Total Earnings:** $1,500 ( annual supply earnings) - $1,800 (annual borrow costs) = -$300

**Net APY** = (-$300) / ($50,000 + $30,000) = -0.375%

In this scenario, considering both supply and borrow transactions, the user would incur a net APY of -0.375%.

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