10-31-2007, 02:02 PM
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#1 |
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Greenhorn
Join Date: Jul 2006
Posts: 24
Rep Power: 6  |
What does it mean: interest calculated daily?
I have a savings account that earns 7.1% (minus 20% tax on profits) interest twice a year i put 120 into every month but after three months i only got 1.52 in interest which is calculated daily can anyone explain why?<br />
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10-31-2007, 02:02 PM
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#2 |
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Greenhorn
Join Date: Jul 2006
Posts: 14
Rep Power: 0 |
What does it mean: interest calculated daily?
I think what you need is interest compounded daily, not calculated daily.
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10-31-2007, 02:02 PM
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#3 |
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Greenhorn
Join Date: Jul 2006
Posts: 48
Rep Power: 6 |
What does it mean: interest calculated daily?
The quoted interest rate for savings accounts is always the annual or yearly rate. Most accounts "calculate" interest monthly. So if your account pays 7.1% annually, they calculate 7.1% of your balance and divide by 12 (for 12 months) and add that amount to your balance at the end of the month. Say you've got $1000 invested. In one month, they figure $71, divided by 12 = $5.9 per month. Same thing if interest is compounded daily, except they divide by 365.
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