1. What is Monthly Yield?

The Monthly Yield calculation shows the current monthly return on a high-yield savings account based on the annual percentage yield (APY). It accounts for compound interest to give you a more accurate picture of your monthly earnings.

2. How Does the Calculator Work?

The calculator uses the monthly yield formula:

Where:

• \( P \) — Principal amount ($)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Time period (years)

Explanation: The formula calculates the total compound interest earned, then converts it to a monthly rate based on the time period.

3. Importance of Monthly Yield Calculation

Details: Understanding your monthly yield helps with budgeting and comparing different savings accounts. It shows the actual monthly return you can expect from your investment.

4. Using the Calculator

Tips: Enter your principal amount in dollars, annual interest rate as a percentage (e.g., 4.40 for 4.40% APY), and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is monthly yield different from simple monthly interest?
A: Monthly yield accounts for compound interest, while simple monthly interest doesn't. This makes yield more accurate for comparing accounts.

Q2: Why does the time period affect monthly yield?
A: The calculation normalizes returns to a monthly basis. Longer time periods allow more compounding, which affects the monthly equivalent.

Q3: Can I use this for certificates of deposit (CDs)?
A: Yes, this works for any interest-bearing account with compound interest, including CDs.

Q4: How often is interest typically compounded?
A: Most high-yield savings accounts compound interest daily and pay monthly.

Q5: Does this account for taxes on interest?
A: No, this shows gross yield before taxes. Your actual after-tax yield will be lower.