Last week you have seen that the differences in the use of interest can affect your investment balance at the end of the year, although all are equally promising 12 percent interest per year. The reason is simple: because the amount of interest you receive is different.

Different interest that you can then bring the term “effective rate.”  I.e. the ratio of the amount of interest you earn at the end of the year, with the amount of money you entered. How to calculate the effective interest rate is very simple: the interest you receive at the end of the year divided by the nominal value of your money at the beginning of the year. (more…)

In past articles we have discussed about simple interest, now I will continue with a discussion about investment with compound interest method.

Compound Interests
The concept of compounding interests is a concept in which the interest you earn will be added to your principal, so that the interest earned in the next year will be even greater. Just like a snowball rolling from the top of the hill of snow. Further down the larger.

Now we’re back to use the example of money $ 1 million earlier. When you open a deposit worth $ 1 million with a 12 percent interest per year, the balance of your investment at each end of the year are as follows: (more…)