How To Translate A 7 Day Yield Of Of 0.04% To A 1 Year Yield ?

[ownyourfuture]

In my IRA at Fidelity, the cash is kept in FIDELITY GOVERNMENT MONEY MARKET
SPAXX. As of a couple minutes ago, it lists a 7 day yield of 0.04%

Hypothetically, if you had $10,000.00 in that fund for one year, & the 7 day yield stayed at that 'exact' rate of 0.04% for the entire period, not counting the little bit of compounding, how much would you have ?

Thanks in advance!

PS: I was going to start a totally different thread on CD rates, but I figured since it was related to this subject, I'd just add it here.
I just opened a CD through Fidelity in my taxable brokerage account. It pays 0.50% for 3 months. Some people I've talked to seemed very leery, saying that doesn't seem possible because if you could get that every three months, it translates into 2.00% per year. (more than the going rate)

The CD's are sold in increments of $1000 & are FDIC insured. $1,000.00 = One CD $2,000.00 = 2 CD's.....................
Do I have anything to worry about ?

[Sue J]

$10,000 x .0004 x 52 weeks = $208 (2.08%)

So you'd have $10,208.

Or is this a trick question?


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[ownyourfuture]

Quote:

Originally Posted by Sue J $10,000 x .0004 x 52 weeks = $208 (2.08%) So you'd have $10,208. Or is this a trick question? Sent from my iPad using Early Retirement Forum

No this is not a trick question, & no disrespect, but I'm 99.99% sure you're wrong

[SecondCor521]

Uh, OK. What did Fidelity say when you asked their customer service? I just chatted with them a few minutes ago so I know they are open today.

[SecondCor521]

Oh, and here is the first link when I googled "7-day yield calculated":

https://en.wikipedia.org/wiki/7-day_SEC_yield

After reading that, I think Sue's answer isn't correct, but I would have made the same mistake without having looked it up.

Following the example in the link above, I think it would be:

$10,000 + (0.04 / 100 * $10,000) / 365 * 365 = $10,004.00

I don't think including the effect of compounding would change the result much ;-P

[marko]

Quote:

Originally Posted by ownyourfuture Hypothetically, if you had $10,000.00 in that fund for one year, & the 7 day yield stayed at that 'exact' rate of 0.04% for the entire period, not counting the little bit of compounding, how much would you have ?

Quote:

Originally Posted by ownyourfuture No this is not a trick question, & no disrespect, but I'm 99.99% sure you're wrong

If you're sure the answer is wrong, you must know the answer then? Or am I missing something?

[pb4uski]

Agree with $10,004... $10,000*(1+.04%).

Technically, I think it is really $10,000*(1+.04%/365)^365 but it is still $10,004.

[Sue J]

So I'm off by $204!

Just didn't know why OP needed a calculation when the rate was .04% and he stated it was for 1 week. Sounded like he needed to know what 52 weeks would bring him.

I'm out on my deck, in the shade of the awning, and it's about 98 in the sun. Between bird watching and Amazon Prime browsing I thought I'd offer a quick answer.

Obviously, it was too quick.... Should have done research.


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[MBSC]

Published yields and returns are expressed on an annual basis after expenses have been deducted.
$10,000 + .04% = $10,004.00

If the MMF has an expense ratio of 0.26%, then the unpublished gross yield before expenses is 0.30%. I have seen people subtract the ER from the published yield.

Regarding the 0.50% 3-month CD, yields are expressed on an annual basis. Each $1k CD will earn about $1.25 (0.50%/12)*3 interest. A 1% high yield savings account currently provides a better return but the rate is not locked.

Quote:

The 7-day SEC Yield is a measure of performance in the interest rates of money market mutual funds offered by US mutual fund companies. It is also referred to as the 7-day Annualized Yield.

Reference: https://en.wikipedia.org/wiki/7-day_SEC_yield

[ownyourfuture]

Thanks for all the replies.
I didn't mean to trick anyone, or put anyone on the spot. I was simply hoping that someone could translate a 7 day yield of 0.04% into a one year yield.

I think the bottom line is that it doesn't really matter. When you're talking about such a minuscule percentage 0.04% (four one-hundredths of 1.00%)
It really doesn't make any difference.

ATTN Sue: Don't feel bad. When I first tried to figure this out, I came up with the exact same amount.

ATTN: All of you who stated $10,004.00. This looks like the right answer. Thanks! From June 1st through June 30th My average balance was a little over 10k my interest was 9 cents. I still have statements from Fidelity showing a yield of 5.00% Thanks fed

ATTN MBSC: Inside, I knew that 1/2 a percent for three months was too good to be true. Thanks for the clarification. I'll research the high yield savings accounts you mentioned.

I don't know how the rest of you feel about it, but I don't agree with the feds keeping interest rates 'this low'. And I don't feel that way simply because I'm not getting any return on my cash. My mother and father made the bulk of their money in CDs from around 1980 through 2000.

I'd be willing to bet in that they averaged at least 7.00% during that two decade period. Does that mean I want to return to 12 to 15% 30 year mortgage rates, absolutely not. But I just have a terrible feeling that this worldwide phenomenon of printing money is going to turn out bad.

Hope I'm wrong

[Sue J]

I like my results better

.04% seems like an insult to your $10,000.

I cleaned out a desk drawer and found the passbook for a 8% CD from my local bank. I don't remember what year it was from. It must have been a while ago when they still issued "passbooks". CDs were my favorite investment for a while there.

[ownyourfuture]

Quote:

Originally Posted by Sue J I like my results better .04% seems like an insult to your $10,000. I cleaned out a desk drawer and found the passbook for a 8% CD from my local bank. I don't remember what year it was from. It must have been a while ago when they still issued "passbooks". CDs were my favorite investment for a while there.

I also had 'passbooks' back in the day
In 1989 I had saved up $10,000. I put it all in a two-year CD at Citibank.
I'm pretty sure they were based in South Dakota back then, & the rate was 9.00% per year. $900 per year in interest, & now I get $4.00

[aja8888]

Columbia S&L 12% CD's in the mid to late 1980's. Remember what happened to that bank?

Getting 0.04% on a $10K CD is a crime.

[RobbieB]

Hehe, back in the early 80's I funded my first IRA with a 10% CD.

That was also the interest rate on my mortgage.

Now is a good time to buy a house, not a good time to buy a CD.

[ssarwar]

The expense is $4.20 per $10000 invested.


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[pb4uski]

Welcome ssarwar but we are talking about an earnings rate on a MM, not an expense ratio.

[ownyourfuture]

ATTN RobbieB:
"Now is a good time to buy a house, not a good time to buy a CD"

You got that right!!