BDMXX: FUNDS 7 Day Yield 4.38% ...isnt that too good to be true or am i missing something?

Question

A 7 day yield of 4.38%...isnt that a really good deal...i mean banks give you a 5.25 % for the whole year...or am i missing (miscalculating) something here...

well if it is the annual rate ..why does it say 7 day yield

Answer 1

The 4.38% is an annualized rate.

To get the daily rate, divide by 360 (not 365) and compound daily.

The actual interest you get per $100 for seven days will be:

100 * (1+ 0.0438/360)^7 -100 = 0.085

You should earn about 8 1/2 cents interest per $100.

Answer 2

Remind me: save previous answer.