The size of percentage rate is an important condition of bank deposit. Bank deposit percentage rate reflects in annual income percent without reference to the amount of deposit.
Interest can be accrued by formula of simple interest and composite interest (capitalization).
Simple interest is an interest accrued to the amount of deposit on the basis of the term of the deposit with the periodicity defined by the bank deposit contract without reference to the interest which was earlier accrued to the amount of deposit.
The sum of money owed to depositor during the accrual of simple interest on deposits is calculated by formula:
∑% = money + money x percent x days
100 x 365(6)
Where money is the amount of money at the deposit account, percent – the annual interest rate, days – number of days for which the interest is accrued.
Namely if you execute a deposit for 12 months with 30% per annum and deposit 5 000 000 BYR with banker, then the amount of money due to return on termination of the term of the deposit, in case the deposit doesn’t presuppose capitalization, makes up:
∑% = 5 000 000 + 5 000 000x30x 365 = 6 500 000
100 x 365(6)
Composite interest (capitalization) is an interest accrued to the amount of deposit and the sum of interest which was earlier accrued to the amount of deposit with regard to the term of the deposit with the periodicity defined by the bank deposit contract.
The existence of this term in the contract means that accrued interest will be automatically (monthly, annually), without your participation, added to the main amount of deposit and will also bring income.
The sum of funds due to return to the depositor on termination of the term of the deposit during accrual of composite interest is calculated by formula:
∑% = money x ( 1 + percent x days ) n
100 x 365(6)
Where n is the number of periods for which interest is accrued during the term of deposit.
For example, the amount of deposit is 5 000 000 BYR, the term of deposit is 12 months, accrual of interest at the rate of 30% per annum with the quarterly capitalization, n=4 since during the term of deposit income will be accrued 4 times. We assume, that there are 91 days in the quarter.
In this case the amount of the money due to return to the depositor on termination of the term of the deposit (it consists of the amount of deposit with percent) makes:
∑% = 5 000 000 x ( 1 + 30 x 91 ) n = 6 672 242
100 x 365(6)
Therefore the amount of money due to return to the depositor on termination of the term of the deposit with the quarterly capitalization of percent (in the second case) is 172 242 BYR more.