How to Use the Cash Yield Calculator
- Enter your Total Cash Balance - this is the total amount of cash you have invested in liquid assets.
- Input your Interest Income - this is the total interest earned from your cash holdings over a specific period (typically annually).
- Provide your Monthly Cash Flow - this represents the average amount of cash entering or leaving your portfolio each month.
- Click the Calculate button to generate your cash yield metrics.
Understanding the Results
- Annual Cash Yield: This shows the percentage return on your cash holdings annually based on interest income.
- Monthly Cash Yield: This represents the monthly return percentage on your cash investments.
- Effective Annual Rate (EAR): This accounts for the compounding effect and provides a more accurate measure of your annual return.
Practical Applications
The Cash Yield Calculator is useful for:
- Comparing different cash investment options
- Evaluating the performance of your cash management strategy
- Assessing how cash holdings contribute to your overall investment portfolio
- Identifying opportunities to optimize cash allocation
Example Scenario
Suppose you have a total cash balance of $100,000 and earn $4,500 in interest annually. If your monthly cash flow is $8,000:
Your annual cash yield would be ($4,500 / $100,000) × 100% = 4.50%
Your monthly cash yield would be 4.50% / 12 = 0.375%
Your effective annual rate would be (1 + 0.045)^12 - 1 = 4.69%