Thursday, March 25, 2010


The term interest seems to baffle some. As consumers, we're familiar with paying interest on a loan or credit card. But did you know that you can put your money to work? Banks will pay you to keep your funds on deposit. Their payment to you is known as interest and is indeed income. Follow this simple steps to calculate your interest income, and you could be laughing all the way to the bank.

Let set an example, if you have Php50,000.00 and want to invest on Time Deposit. The bank will offer you their TD program with respected interest. From the below chart (example), your money can avail 2.5% in 364 days or 2.0% in 35 days.

Interest = Principal x Rate x Time. 

Principal refers to the initial amount of your deposit or investment. Rate is the percentage used to calculate the monetary return on your investment. Time is simply how long you hold the investment before withdrawing it from the bank. Generally, instruments that pay a higher yield require a higher principle.

Multiply your principal by your interest rate, then the days of holding.

    50,000.00 x 2.0% = Php1,000.00
 * 1,000.00 x 35/365  = Php95.89 interest on 35 days

     50,000.00 x 2.5% = Php1,250.00
 * 1,250.00 x 365/365 = Php1,250.00 interest on 365 days

If your interest compounded monthly/yearly, add your result to your balance, and repeat the previous step.

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