1. What is Money Market Interest?

Money market interest is the return earned on funds invested in money market instruments. These are short-term, highly liquid investments with maturities typically less than one year.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( Principal \) — Initial investment amount
• \( Rate \) — Annual interest rate in decimal form
• \( Time \) — Investment period in years

Explanation: This formula calculates the simple interest earned without compounding. For money market accounts, interest is typically calculated daily but paid monthly.

3. Importance of Interest Calculation

Details: Accurate interest calculation helps investors compare different money market options, forecast earnings, and make informed investment decisions.

4. Using the Calculator

Tips: Enter principal in dollars, rate as a decimal (e.g., 0.05 for 5%), and time in years (can use fractions like 0.5 for 6 months). All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: Is this simple or compound interest?
A: This calculates simple interest. Money market accounts typically use daily compounding, but this calculator provides a basic estimate.

Q2: How often is money market interest paid?
A: Interest is usually calculated daily and paid monthly, though terms vary by institution.

Q3: Are money market rates fixed or variable?
A: Rates are typically variable and change with market conditions.

Q4: What's the difference between APR and APY?
A: APR doesn't account for compounding, while APY does. This calculator uses APR for simplicity.

Q5: Are money market investments FDIC insured?
A: Money market accounts at banks are FDIC insured, while money market funds are not.