Help me figure out savings interest rate?

[lecach]

We sold our old house today. Our new house will be done in 2 weeks. We are getting a check for $45,000 with most of that going to the down payment on the new house. For the 2 weeks we need to do something with the money. Probably putting it in the state employees credit union money market account. It pays 3.92% with dividends compounded daily. So - how much money will we make in the two weeks?

 

[BunsenH]

Not sure if this is exact, but:

If the annual rate is 3.92%, and the money was in there for the year, you would make $1764.

Since the money will be in the account for 1/26th of a year (2 weeks), you will earn about $68.

 

[lecach]

well the exact wording was that the rate is 3.92% with dividends compounded daily, paid monthly. So wouldnt that equal more money?

 

[wnissen]

The compounding schedule has only a minimal effect over this period of time and for a relatively small interest rate. A 3.92% interest rate compounded annually has an effective rate of 3.92, that is, it's always the same. Take that same 3.92% and compound it continuously (i.e., every second you get paid one second's worth of interest) and the effective rate gets bumped up to 4.00%, a difference of only 2%. Enjoy your $68, but don't forget that you'll have to pay tax on it. I hate that.

Walt