The current yield on my account is 1.79%, now does that mean I will get $1.79 for every $100.00 that is in the account every month? Or is it not that simple? I am asking this because I have had instances where I had over 80.00 producing sums in return of say, .08 or similar…doesn’t make any sense…please enlighten me.
umm The interest rate is 1.79pct per annum. (ie you will earn $1.79 for every $100 per year - not month).
speckofdust is right - interest rates are generally given as an APR (annual percentage rate), so you will get $0.0179 per $1 per year (assuming it is in there all year).
But, if the interest is paid monthly, you can’t simply divide 1.79% by 12 to get the monthly interest rate, because the APR figure takes into account compound interest, i.e. the interest on the interest paid earlier in the year. So the monthly rate will be slightly less than 0.1492% per month (1.79/12). Rough calculation shows that this is in the right ballpark - say with $80 you would get ($80 x 0.0014) = $0.11 per month, pretty close to what you said you got.
I think the way to work it out is to find x where (1+x)[sup]12[/sup]=1.79, but it’s too early in the morning for me to work out if that’s right. Some kind of finance guru will probably pop up to help you soon…
To calculate interest earned in a month:
- Start with your APY, expressed as a decimal (.0179)
- Add 1 (1.0179)
- Take the twelfth root (1.0014796)
- Subtract 1 (0.0014796)
- Multiply times the beginning balance ( x $80=11.8 cents).
Of course if you make deposits or withdrawals during the month, then it gets more complicated.
Bottom line, you aren’t going to get much interest these days on a small balance. If you found a place paying 1.79% per month, you’d have a scoop!