>With Robinhood, you’ll earn 3% on your money in both Checking & Savings, and interest compounds and is paid out daily. That’s an extra $240 a year for the average American household with $8,000 in the bank
Does not compute. If it compounds daily then yearly total is above 3%
It's standard to talk in annualized interest rates to make simple comparisons between accounts. A daily interest rate of 0.008 % will compound up to just over 3 % of effective annual rate.
If the daily interest rate is 0.008 then the annualized rate is 2.92%, not 3%. The standard is to multiply by the number of periods, not to take compounding into the calculation.
Why would the standard be to calculate a number that has no use and isn’t rooted in reality? If the rate is 3% annually and paid out daily, the the daily rate is the number that compounded yields 3% annually....
Because it makes it easy to calculate how much is distributed. Just take the annual rate, divide by number of periods, and multiply by the amount of principle.
That's true of the nominal rate. A nominal 3% divides to an effective daily rate of 0.0082 %. But the effective rate is (1 + Nominal Rate / n)n - 1 or just over 3.2%.
Does not compute. If it compounds daily then yearly total is above 3%