MMA interest rates are calculated based on the annual percentage yield (APY), which considers both the interest rate and the frequency of compounding. This is the basic rate at which your account earns interest over a specified period.
Interest on MMAs is often compounded daily or monthly. Compounding frequency affects how often the earned interest is added to the principal balance, which then earns interest itself.
The calculation used is:
A=P(1+r/n)^(n*t)
A is the amount of money accumulated after n periods, including interest.
P is the principal amount.
r is the annual interest rate.
n is the number of times interest is compounded per year (365 for daily compounding, 12 for monthly compounding).
t is the time the money is invested in years.