How to Figure Interest on APY Money Market Account
An annual percent yield (APY) money market account is a high-interest savings account offered by both banks and credit unions. While the account pays a higher interest than a standard money market account, it has certain limitations such as maintaining a minimum balance of around $1,000 and limiting the number of monthly withdrawals and checks you can write each month. When you open an APY money market account, the bank will disclose the annual percent yield, which is the interest rate after compounding. Here is a method you can use to figure the interest on your APY Money Market Account.
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Instructions
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1
Add 1 to the money market account's APY. The APY is given on the money market account and the 1 represents the principal on the account. For example: 3.4 percent is a money market account; thus, .034 + 1 = 1.034.
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2
Divide the 1 by the number of times the money market account was compounded. For example, if the investor keeps the money in the account for three years and it compounds monthly, the account compounds 36 times. Divide 1 by 36; 1 / 36 = .0278.
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3
Raise the number calculated in Step 1 by the number calculated in Step 2. Raising a number by the power of another number is using exponents, which multiplies the number times itself. A carrot, ^, represents the exponent: 2 ^ 3 = 2 x 2 x 2 = 9. In the example, 1.034 ^ .0278 = 1.000929.
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4
Subtract the total in Step 3 by 1. For example, 1.000929 - 1 = .000929.
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Multiply the answer in Step 4 by the number of times compounded. For example, multiply .000929 by 36. This totals 0.03345 or an interest rate of 3.35 percent.
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