1. What is MMF Investment?

MMF (Money Market Fund) is a type of mutual fund that invests in highly liquid, short-term instruments. This calculator helps estimate the future value of an MMF investment considering compound interest.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( Principal \) — Initial investment amount
• \( Rate \) — Annual interest rate (in decimal form)
• \( Compounds \) — Number of compounding periods per year
• \( Time \) — Investment duration in years

Explanation: The formula accounts for the effect of compounding, where interest is earned on both the initial principal and accumulated interest.

3. Importance of Compound Interest

Details: Compound interest can significantly increase investment returns over time, especially with more frequent compounding periods and longer investment horizons.

4. Using the Calculator

Tips: Enter principal amount in dollars, annual rate as decimal (e.g., 0.05 for 5%), compounding frequency (typically 12 for monthly), and time in years. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What's typical MMF interest rate in 2025?
A: Rates vary but are generally between 2-5% depending on economic conditions and the specific fund.

Q2: How often do MMFs typically compound?
A: Most MMFs compound interest daily or monthly (365 or 12 times per year).

Q3: Are MMF returns guaranteed?
A: No, while MMFs are relatively safe, returns can fluctuate with market conditions.

Q4: What are the tax implications?
A: Interest earned is typically taxable as ordinary income in the year it's earned.

Q5: How does this compare to high-yield savings?
A: MMFs often offer slightly higher yields but may have different liquidity terms and risk profiles.