How are interest rates determined for online savings accounts and how is...

[dizzy_dizzy_dizzy]

...that interest calculated monthly? Are they affected by fed interest rate cuts or does that have nothing to do with it?

If a bank offers an online savings account at 5% APY and you have a thousand dollars in there, how much interest do you get after a month. What if you leave it in there, does the interest compound? Is it as if you redeposited $1K plus the small interest from the previous month and now you are making another 5% on your original deposit plus the small earnings (assuming the rate didn't change)?

Thanks for you help, the whole thing is very confusing to me.