Vanguard Prime MM

[CCdaCE]

Help me calculate interest and/or what am I missing?

I dumped $3k into VG's Prime Money Mkt. on 5/16, I think?

On 5/30, they supposedly paid a dividend of 0.00435/per share (per $1).

My balance shows up as $3005.90 on 6/2.

What gives?

By my calculation it should be 3000 * .00435 = $13.05

I didn't think it mattered what your balance was throughout the month, just what it was on 5/31, or their record date. But, since I had it in for approx. a half of a month, I guess I understand that they only paid about a 1/2 mo. of interest. But, playing with the days or many other variables, I can't come up with that $5.90.

Simple, yet hard. Explain it to me, please.

-CC

 

[cute fuzzy bunny]

Balance and interest are computed daily on the prime MM.

Otherwise everyone would be sticking money in there on the 31st and then pulling it out the next day after the interest was paid.

 

[Freein05]

It looks like you got credit for the money being at Vanguard for 14 days. This is how you can calculate it.

3000*.00435= 13.05
Divided by 31(days in month) 13.05/31 = .42096
Times number of days Vanguard had money.42096*14= 5.89

The difference is probably in the .00435 starting figure. They may also use a 360 or 365 day year to calculate interest this will also make a difference.

 

[CCdaCE]

CFB: AHHH, it is daily. That was confusing to me, since it's never specifically stated that way.

Freein05: I figured it was some detail like the 360 day thing, or some other combination that I wasn't trying.

These replies answer my question, thanks.

-CC

 

[FIRE'd@51]

Let me take a stab at it. They do accrue the interest daily. There is no ex-dividend date like with a stock.

I believe the explanation is in the day count. The $0.00435 per share is for 31 days.

(14/31) x $13.05 = $5.89

So I would say you were invested (earning interest) for 14 days. Furthermore, at the end of April the yield on the Prime was 5.10%. At the end of May, it was 5.13%. Presumably, you were invested at a slightly higher rate than the average. That's probably the source of the extra penny.

I had money in the same fund for the full 31 days with no intra-month investments or withdrawals, and my interest agreed to the penny when I multiplied my April 30 balance by 0.00435.

 

[JohnEyles]

Not an answer to your question, but it dawned on me recently
that I was actually better off with the Treasury MM fund than the
Prime MM fund, because the after-tax yield was better, thanks
to my state's relatively high marginal income-tax rates.

 

[CCdaCE]

Not an answer to your question, but it dawned on me recently
that I was actually better off with the Treasury MM fund than the
Prime MM fund, because the after-tax yield was better, thanks
to my state's relatively high marginal income-tax rates.

Yeah, my state tax is around 4.3% (marginal tax bracket). So Treas. is barely less yield by my calculations.

Thanks for the headsup though.

-CC