I have an account that is giving me 4.23% on my Money Market account and it says it matures every 31 days. Does that mean I will earn $846 every 31 days as long as thats the interst rate maintains and I keep $20,000 in the account. Im new to investing and need some help.
2006-06-12 08:26:49 · 7 answers · asked by Waterworking 2 in Business & Finance ➔ Investing
It is already been pointed out that the 4.23% is an annual rate. Banks compound interest daily using the annual rate divided by 360. This means that if you put $20,000 in the bank for a year, you should have:
$20,000 * (1+.0423/360)^365 = $20,867.36
at the end of the year. That averages out to $73.03 per month (though it is less in the early months and more in the later months).
2006-06-12 08:35:32 · answer #1 · answered by Ranto 7 · 0⤊ 0⤋
You should make $70.50 in the first month. IF rates do not change all year, AND you do not withdrawal the money, then you should get $846 at the end of the year. This presumes the 4.23% is an annual percentage yield and not the face rate.
Since rates will change every month it is impossible to predict your income. Your principal is secure but your income is highly risky.
The traditional reason for investing in stocks was that the dividends tend to be secure overall, but the principal is at risk.
So the answer is, you cannot predict beyond the first month how much money you will make in one year with any precision. It is the flipside of the stockmarket where you can reasonably estimate the amount of money you will make in income if you are prudent, but there is no way at all to predict the value of the assets you own.
2006-06-12 13:57:53 · answer #2 · answered by OPM 7 · 0⤊ 0⤋
$846 a year
2006-06-12 08:30:24 · answer #3 · answered by Koz 2 · 0⤊ 0⤋
on a $250 beginning balance with no other contributions or withdrawals during a 12 month period > $5 for the whole year. That's about 41 cents /month!
2016-03-27 01:51:07 · answer #4 · answered by Anonymous · 0⤊ 0⤋
$846 is the yearly rate.. divide that by 12 and you should get the monthly rate (approximately)
2006-06-12 10:21:16 · answer #5 · answered by do it movin' 1 · 0⤊ 0⤋
No, that's an annual rate. You'll get about $72 per month.
2006-06-12 08:30:21 · answer #6 · answered by just_the_facts_ma'am 6 · 0⤊ 0⤋
that 4.23% IS BASED YEARLY
Oh my goodness they would be out of business if they paid monthly.
2006-06-12 11:21:08 · answer #7 · answered by Scanless1999 3 · 0⤊ 0⤋