In the last articles, you have learned about how to know your financial position at this time. And so you’ve learned about how to set up a Family Budget.

Now, you may decide to make investments to increase your property value. From the number of possessions you have, you may have some idle money can you invest. From the financial budget, you may also have approximately $ 300 thousand per month that can be invested.

The problem is, you probably know how to calculate the benefits of investing. Many people who invest, but do not know how to calculate the profits he had got.

To find out, you need to learn about the concept of interest. The concept of interest often referred to as the concept of  investment return.  Both have the same principle.

Let us take an example, let’s say at this point you have funds amounting to 1 million. You go to the bank, to meet its service customers, and express your intention. He said that the bank will impose an interest rate of 12 percent per year if you open a deposit on it.

Now, we will calculate how much interest you’ll get at the end of the year, and how the balance of your investment if you let alone rotates investment for ten years. For that, there are several options of interest:

1. Simple interest
2. Compound interest

Compound interests can be divided with:
* Yearly compound interest
* Monthly compound interest
* Daily compound interest

I’ll show how to calculate for each of the interest system. Like it or not, I think it would be very important if you know it.

Simple Interest
If the bank uses a system of simple interest, then at the end of the first year, you’ll get interests rate:
$ 1 million x 12 percent = $ 120,000.

At the end of the second year, you will get interests rate:
$ 1 million x 12 percent = $ 120,000.

At the end of the third year, you will get interests rate
$ 1 million x 12 = $ 120,000.

And so on, until after ten years, you will get a total interests rate: $ 120.000 x 10 = $ 1.200.000.

Thus the balance of your investment will be: $ 1,000,000 (initial funding) + $ 1.200.000 (total interest) = $ 2.200.000.

Simple, right? Hence, the interest calculation system is called simple interest.  The next article I will explain about compound interest. Hopefully this explanation can be useful.

Related posts:

1. Calculate the Growth of Investment Funds (2)
2. Calculate the Value of Investments Based on Interest
3. Calculate the Value of Investments Based on Time
4. Three Most Feared Investment Risks