1. What is a High Yield Money Market Account?

A High Yield Money Market Account is a type of savings account that typically offers higher interest rates than regular savings accounts, with the benefit of daily compounding interest. These accounts are ideal for short-to-medium-term savings goals.

2. How Daily Compounding Works

The calculator uses the daily compounding formula:

Where:

• \( FV \) — Future value of investment
• \( P \) — Principal investment amount
• \( r \) — Annual interest rate (in decimal)
• \( t \) — Time in years
• 365 — Number of compounding periods per year

Explanation: Interest is calculated daily and added to the principal, resulting in "interest on interest" growth.

3. Importance of Interest Rate

Details: Even small differences in interest rates can significantly impact your returns over time due to compounding effects.

4. Using the Calculator

Tips: Enter principal amount in USD, annual interest rate as a decimal (e.g., 0.05 for 5%), and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does daily compounding differ from monthly compounding?
A: Daily compounding calculates and adds interest every day, leading to slightly higher returns than monthly compounding over time.

Q2: What are typical interest rates for high yield MM accounts?
A: Rates vary but typically range from 0.5% to 5% APY (as of 2023), depending on economic conditions.

Q3: Are there risks with money market accounts?
A: While generally safe, they're not FDIC-insured like regular savings accounts. Rates can also fluctuate.

Q4: How often do interest rates change?
A: Rates can change frequently based on the Federal Reserve's monetary policy and market conditions.

Q5: Is there a minimum balance requirement?
A: Many high yield accounts require minimum balances (often $1,000-$25,000) to earn the advertised rate.