How To Work Out Annual Interest Rate On Savings

Generally traditional savings accounts use compound interest 6 so to calculate how much annual interest you ll earn on 1 000 use this equation.

How to work out annual interest rate on savings. Annual interest rate your savings will be worth. For a quarterly rate divide the annual rate by four. Should you wish to work the interest due on a loan you can use the loan calculator. Even though the interest rate in both examples is 5 the apy in the compounding example is 5 12.

The effective annual rate is the interest rate earned on a loan or investment over a time period with compounding factored in. A p 1 r n nt. While the simple interest equation earned 5 the monthly compounding equation earned 5 12. It can also be referred to as the annual equivalent rate aer.

Whenever banks pay interest more frequently than annually the apy is higher than the stated annual interest rate. Financials institutions vary in terms of their compounding rate requency daily monthly yearly etc. To give an example a 5 annual interest rate with monthly compounding would result in an effective annual rate of 5 12. Lump sum and or.

If you have an account with 1 000 that compounds monthly at a 1 interest rate first you would identify all your variables. For a weekly rate divide the annual rate by 52. A the total amount you are trying to find. When is interest compounded.

You can use the same interest rate calculation concept with other time periods. For a daily interest rate divide the annual rate by 360 or 365 depending on your bank.