How To Calculate Money Market Account Interest?


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Aun Jafery Profile
Aun Jafery answered
Money Market Accounts as opposed to Certificates of Deposits allow depositors to withdraw funds subject to a limited number of checks each year. The advantage is flexibility in not having one's funds locked away in low interest investments when interest rates are climbing. The interest rate calculation on a money market account can be tricky as it can fluctuate based on market rates.

Interest is calculated in this case for each period based on the prevailing rate. The date on which the rate of interest changes and the date on which the interest is compounded by the bank have to be considered before calculating the interest that is earned. In simple cases where the interest is calculated by compounding it annually the interest can be calculated for each term on the principal and added at the end of the year.

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