A money market investment calculator is a calculator that is used on various money market deposit account in the calculation of the rate of compound interest incomes with detailed information on the interest rates, first deposits, the period of time and intermittent deposit amounts. It also has the capacity to display an investor’s yearly investment growth chart.
MONEY MARKET INVESTMENT ACCOUNT
A money market investment account is an interest-bearing investment account that provides investors with restricted check writing capability and naturally pays a larger interest rate than a savings account. A money market investment account is a secured trading savings account that gives investors basic trading rules which are to cling to a minimum balance, confines the sum of monthly transactions and for all interest rates that are centered on market rates. Most times, banks which are allied with a money investment account rewards investors with a greater interest rate (by an increase of one percent) than they give for a regular savings account.
The difference between a money market investment account and a regular savings account is seen in the higher interest rate. Although an increase in interest rate is seen as an advantage in the money market investment account, it is a disadvantage if an investor’s account balance declines below minimum requirements. At this rate, the investor can be charged with a huge penalty that can be damaging to the gains of the greater interest rate.
DEFINITION OF TERMS USED IN MONEY MARKET INVESTMENT CALCULATOR
STARTING BALANCE OF MONEY MARKET ACCOUNT: this can be defined as the current balance in an investor’s account which is not part of the periodic deposit. Every money market account requires a minimum of 1,000 dollars.
PERIODIC DEPOSIT INTERVAL: this is the period/ time at which a specific investor wants to calculate his/her interest rate using a money market investment calculator.
PERIODIC DEPOSIT AMOUNTS: this can be defined as the agreed deposit amount an investor must keep up to whether weekly, monthly or yearly. The future value of money market account is said to be the amount in which the account has to increase based on the entered interest rates.
TOTAL MONEY MARKET ACCOUNT DEPOSIT: this can be defined as the overall amount of money an investor decide to deposit in conjunction with the periodic deposit for the number of months imputed.
HOW TO CALCULATE MONEY MARKET INVESTMENT
The first step an investor should take in calculating money market investment is to cue in all known investment parameters in a money market investment calculator which are the likes of initial deposit amount, the annual interest rate, and the probable number of years for which the interest will be calculated.
The next step to take by the investor is to impute the deposit amount and then click the “Calculate Money Market Account Interest” button. Next, click on the blue question marks for an additional clarification of each entry field.
HOW TO USE A MONEY MARKET INVESTMENT CALCULATOR TO CALCULATE THE PRESENT VALUE OF MONEY MARKET INVESTMENT
The present value of an investment is seen as the existing value of an anticipated investment. The present value of an investment can be determined if the inventor keep record of the future amount used in the investment, the rate of profit anticipated and the duration he plans to hold the specific investment. The present value is then calculated as follows:
For example, an investor after an investment of 2 years, wants to have a savings of 100,000 dollars for 20 periodic times. The calculation of the present value can help the investor to determine how much should be placed apart for today’s investment in other to attain his future goal. Tat this stage, the investor needs only a 5% interest rate in other to raise the value of the principal.
PV=X/ ((1+r) ^n)
Where PV= present value of investment
X= future value of investment expected
R= periodic rate of return for the investment
N= number of periods
Therefore, PV= 100,000/ ((1+5) ^20
HOW TO USE A MONEY MARKET INVESTMENT CALCULATOR TO CALCULATE FUTURE VALUE OF MONEY MARKET INVESTMENT
The future value of an investment is the value of a current investment at a precise point in time in the future based on an assumed volume 0f growth over time. When based on a known growth rate, a 10,000 dollars investment made in today’s current date can be worth 100,000 dollar in the nearest 20 years which means the future value of the 10,000 dollars investment is 100,000 dollar. For example, an investment of 100 dollars was made with an interest rate of 5%. The future value will be calculated as:
FV=PV+PV (1+R) ᶯ
In conclusion, the use of a money market calculator is an excellent device for calculating money market investments. So, investors should use is often in other to save and gain more.