ok, i just signed up for paypal's money market where you earn interest. at the time, i had $10 in my account, and the money market rate is at 5.04%. well some more money was added into my account and i had $20. now the money market has added 1 cent, making my total $20.01. how do i calculate the earning of 1 cent? in other words, how do i figure out how much i will earn depending on how much money is in my account? i want to know how they calculated that i gained 1 cent.....thanks so much in advance!
2007-06-02 06:11:27 · 5 answers · asked by Anonymous in Business & Finance ➔ Investing
Here's a rough way to calculate it:
If you earn 5.04% annually, divide that by 12, so you earn 0.42% monthly. The decimal value of 0.42% is actually 0.0042. Multiply $30 (the total in the account) by 0.0042, and you get 0.126, or about 13 cents a month. So this is the type of calculation that is involved, and it depends also on when you deposited the extra money during that month. Over time, the compounding effects can be huge (5.04% on $10,000 compounded annually over 10 years will give you a gain of $6,351 after 10 years).
2007-06-02 06:27:48 · answer #1 · answered by KatGuy 7 · 3⤊ 0⤋
JKat has the basics correct..... but;
The 5.04% is most likly an APY (Annual Percentage Yield) which takes compounding into account. So... you must have the APR (Annual Percentage Return). The best way would be to caculate the daily APR and multiply it times the amount of days and then muliply it by the funds.
Also.... ask your local bank manager! (I know it's not PAYPal, but it works the same way)......
2007-06-02 06:44:24 · answer #2 · answered by Common Sense 7 · 1⤊ 0⤋
The more honest way to do it would be the APY mentioned above. A more nefarious way would be to give interest at the end of each day (so ((amount of money in account)*(interest rate))/365.25). I say nefarious because it gives slightly less interest at the end of the year and because a lot of companies will use little slights of hand like this to make their offers sound better than they really are. But you never know.
2007-06-02 10:20:19 · answer #3 · answered by shabasquaia 1 · 1⤊ 0⤋
Use this Compound Interest Calculator:
http://www.moneychimp.com/calculator/compound_interest_calculator.htm
2007-06-02 09:45:37 · answer #4 · answered by Benjamin 2 · 0⤊ 0⤋
y dont u jus ask them
2007-06-02 06:15:01 · answer #5 · answered by roxylue 2 · 0⤊ 2⤋