# Annual Percentage Yield (APY)

The Annual Percentage Yield (APY) dynamically adjusts to reflect the current utilization of our lending services. The APY on JAX 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:

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

### Example

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

**Supply Side:**

The user's 1 ETH deposit (assuming 1 BTC = $5,000 for simplicity) earns a base APY of 3%, amounting to $150.

**Borrow Side:**

For borrowing 60% of the deposit value in stablecoins ($3,000), the user faces a 6% borrowing APY, which is $180.

**Net Earnings and APY Calculation:** Total Supply Earnings: $150 Total Borrow Costs: $180

**Net Total Earnings:** $150 ( annual supply earnings) - $180 (annual borrow costs) = -$30

**Net APY** = (-$30) / ($50,00 + $3,000) = -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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