How to calculate the interest on the deposit?

At present, the variety of offers of credit institutions on deposits can confuse a potential depositor. Banks offer various options for calculating interest: once a month, quarterly, six months or a year, at the end of the contract, with capitalization. But how to calculate the interest on the deposit?

This does not require economic education or special knowledge, it is enough to know only the amount and term of the deposit, as well as the interest calculation scheme and the interest rate.

What are the schemes for calculating interest

There are only two schemes for calculating interest on the deposit:

  • without capitalization of interest;
  • with interest capitalization.

In the first case, interest is calculated either at the end of the contract, or on a separate account at any frequency (for example, monthly or semi-annually). Thus, the amount of the deposit remains unchanged and can only be replenished by the depositor himself, if the terms of the agreement allow it.

In the second case, interest is charged at regular intervals and transferred to the main account. That is, the amount of the deposit with each such accrual increases by the amount of accrued interest, and with the next accrual, the amount of interest also increases.

Accrual without capitalization (simple interest)

In the case of accrual without capitalization, the interest on the deposit can be calculated using the following formula:

where

Sp - the amount of accrued interest on the deposit,

S - the amount of the deposit,

P - the rate on the deposit (in percent per annum),

t - term contribution in days,

Y - the number of calendar days in a year (365 or 366).

For example, Anton put 10,000 rubles at 11% per annum for six months, while the terms of his agreement do not allow replenishing the deposit. Then, according to the calculation, he will receive interest in the amount of 542.47 rubles:

If the terms of the agreement allow replenishing the deposit, then the interest is calculated using the same formula, but the calculation is divided into separate periods: before the first replenishment, between the first and second replenishment, and so on.

For example, Boris also deposited 10,000 rubles at 11% for six months, but at the same time he replenished the deposit twice: in 30 days for 1,000 rubles, then in two months for another 2,000 rubles. For him, the interest will amount to 641.91 rubles and will be calculated for individual periods:

capitalization (compound interest)

The calculation of interest on a deposit with capitalization will look somewhat more complicated:

where

Sp is the amount of accrued interest on deposit,

S - deposit amount,

P - deposit rate (in percent per annum),

t - period of interest accrual,

Y - the number of calendar days in a year (365 or 366);

n - the number of periods of interest calculation.

For example, Vasily made a deposit on 01/01/2014 in the amount of 10,000 rubles for six months at 11% per annum with a monthly capitalization, replenishment of the deposit is not provided for by the terms of the agreement. Then he will receive at the end of the term interest in the amount of 558.03 rubles:

The calculation takes into account the terms of capitalization of interest: since the contribution was made in January, there are three different periods of interest - 28 days in February, 30 days in April and June, 31 days in January, March and May.

If the deposit provides for replenishment of the deposit, then the calculation will be made according to the same formula, but for separate periods, as in the case of simple interest.

For example, Grigory opened a deposit on 01/01/2014 in the amount of 10,000 rubles for six months at 11% per annum with a monthly capitalization, while he replenished the deposit twice - on 15.01.2014 for 1,000 rubles and on 31.03.2014 for 2,000 rubles... He will receive 664.45 rubles of interest:

Which accrual scheme is more profitable

It is worth noting that depositors are often mistaken about the amount on which interest will be accrued, naively believing that by making a large amount on the day of the end of the deposit term, they will receive interest for the entire term from the final amount. This opinion is erroneous, as can be seen from the calculations for specific examples.

The above calculations show that the most profitable scheme for the depositor is the accrual of interest with capitalization. But to increase the profitability of the deposit, it will be useful to systematically replenish the account.

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