How to calculate capitalization of interest on a deposit: calculator and formula
To understand how much profit a compound interest deposit will bring, you need to calculate its yield. To do this, use online calculators located on the Internet pages of many banking services, or independently - using a special formula for calculating interest with capitalization - X = Y × (1 + (P/100)/D) D, where:
Let's look at an example of how capitalization of a deposit of 1 million rubles for a period of 1 year is calculated at a rate of 16% per annum:
X = 1000000 × (1 + (16/100)/12) 12
First, we convert the interest rate (P) to decimal form and exit mobile number database divide it by the number of periods and add one to this: 1 + (16/100)/12 = 1.01333.
Next, we raise the obtained value to the power of 12 (the number of capitalization periods): 1.01333 12 = 1.172224.
We multiply the final result by the initial deposit amount: 1,000,000 × 1.172224 = 1,172,222 rubles.
As a result, the client will earn just over 172 thousand rubles on this deposit.
Deposits with compound interest are not always more profitable and convenient than regular ones for several reasons:
The nominal interest rate on them is usually lower than on deposits with interest payment at the end of the term.
The conditions for deposits with capitalization are usually more stringent: financial institutions often limit options for replenishment, partial withdrawal of interest or principal.
In case of early termination of the agreement, creditors often reserve the right to pay interest at the nominal rate (excluding capitalization).