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The APR or Annual Percentage Rate of a bank CD is how much you actually get at the end of the year, due to compound interest.
To keep it simple, let's say you buy a hundred dollar CD and the percentage rate you are promised is ten percent. You expect to get your hundred dollars plus an extra ten dollars at the end of the year. Due to the magic of compound interest, you get more.
Suppose the bank compounds the interest every week. (Many banks compound daily!)
The first week you get a week's worth of interest on your hundred dollars.
The second week you get a week's worth of interest on your hundred plus interest on the previous week's interest.
The third week you get interest on your hundred and on the first week's interest and on the second week's interest.
And on and on.
So the only number you care about is not the Interest Rate, but the Annual Percentage Rate, because that is what you will actually receive at the end of the year.
If the Percentage Rate is 4.21% and the APR is 4.30% you will get $4.30 interest on each $100 in your bank CD.
None of this applies to Money Market Funds. Their percentage rates can change from day to day.
What else can I help you with?
Do money market accounts have higher rates than CDs?
Money market accounts usually carry a much lower interest rate than CDs. CD's can range anywhere from 2-5% APR, while money market accounts are usually less than 2% APR, since they're centered mostly in the stock market and can't guarantee a higher interest rate because of this.
Why is investing in a money market mutual fund a higher risk than investing in a certificate of deposit?
because unlike CDs, money market mutual funds ____________________are not insured by the FDIC (gradpoint)
What is the investment advantage and disadvantage of money market mutual funds over Cd's and savings accounts?
Money market mutual funds are safe and extremely liquid. There are usually no fees associated with transactions in money market funds. Most brokerage accounts provide access to money market funds which can be used to park funds from stock or bond sales pending reinvestment. The drawbacks to money market funds are that the interest rate paid is only a fraction of a percent and the money held in brokerage accounts is not insured against loss by the FDIC. CDs and savings accounts offered by banks offer higher rates of interest and are insured against loss by the FDIC.
What online bank gives the best money market interest return?
Ally bank has some of the best money market interest return rates. Also, consider checking out their CDs. Ally's CDs also have competitive interest rates.
What is a money market CD?
Wait! You found one!? A money market Cd is a rare and highly valuable procduct of Soviet Russia. These Cds are worth hundreds on the black market today
Is my money harder to access in a CD Account instead of a Money Market Account?
Yes, Certificates of Deposit (CDs) are fixed term deposits. That means you can't access the money (except for a large penalty) for the term of the deposit, usually anywhere from 3 months to 5 years. Money Market accounts are typically much more liquid, though they may limit withdrawals per month.
What types of bank accounts are presently available on the money market?
There are several types of bank accounts available on the money market, including savings accounts, checking accounts, money market accounts (MMA), and certificates of deposit (CDs). Savings accounts offer a higher interest rate than regular checking accounts and are typically used for long-term savings goals. MMAs offer a higher interest rate than traditional savings accounts but may require a higher minimum deposit. CDs are time deposits that lock in the invested funds for a set period with a fixed interest rate.
What is the trade off to putting money in savings accounts compared to a money market accounts or a certificate of deposits?
The trade-off between savings accounts and money market accounts or certificates of deposit (CDs) primarily revolves around interest rates and liquidity. Savings accounts typically offer lower interest rates and provide easy access to funds, making them ideal for emergency savings or short-term needs. In contrast, money market accounts may offer slightly higher interest rates with limited check-writing capabilities, while CDs generally offer the highest rates but require funds to be locked away for a specified term, sacrificing liquidity. Thus, the choice depends on your financial goals and need for accessibility versus maximizing interest earnings.
What is one speaking about when one mentions the IRA Money Market?
An IRA or Individual Retirement Account is an offered by financial institutions. Contributions to an IRA may be invested in stocks, bonds, money market, and CDs.
What are some features to the vanguard total stock market?
Vanguard total stock marketoffers a wide range of stock options, like mutual funds, retirement funds, EFTs, annuity portfolios, IRAs, college funds 529 portfolios and stock, bonds & CDs as well as financial advice.
What are the advantages of having a Money Market deposit account?
Money Market accounts will typically pay higher interest than a traditional savings account. In comparison to CDs, a Money Market account generally does not tie up your deposit for a set period and withdrawals can be made without penalty.
What's the highest interest rates that the online financial institutions paying for 2 year CDs?
The higest rates can be between 1.5%-3% APR. The APR is different for each financial institution.
