Not quite into financial works, need help in fixed deposit calculation.

If I have RM5000 in my hand and thinking to apply for a fix deposit scheme with rates of 3.10% for one month tenure, renewable for every month.

After 2 years without decrease nor increase of interest rates, would the balance reaches RM5308 or RM10562.69 (figures calculated in different ways)? Or neither the answers stated and how should I calculate them?

I know extremely little in this fixed deposit matter and to someone who has not any experience managing FD (and do not plan to depend to unit trusts and other invesment methods), how should you introduce the rules, pro and cons of Fixed Deposit?

Thanks loads

The answer is
5000 x 3.1/100 =155. per year
2 years= 310

i think that's not correct. he's calculating by monthly basis.

i forgot my maths formula is secondary school but what he means should be

Month1 : 5000 x 0.031 + 5000 = 5155
Month2 : 5155 x 0.031 + 5155 = 5314.81
Month3 : 5314.81 x 0.031 + 5314.81 = 5479.56
and so on... anyone knows what kind of formula is this again?

BTW where do you get 3.1% interest per MONTH?? I'm also VERY interested. Most banks gives such interest by YEARLY basis, so you need to divide 12 again oh..

This post has been edited by hivemy: May 5 2008, 07:55 AM

impossible 3.1% a month, else it means 36%++ a year ...

FD interest is more then normal saving account but surely lesser then UT funds ... even UT funds also projected at 10%++ a year only ...

Hi,

The threadster did not say that it was 3.1% / month.....they said it was 3.1% renewable every month

Take a look at http://www.math.com/tables/general/interest.htm this provides the formula for compounding interest (which is what I believe you are talking about)

Regards
Trevor Keegan
www.taxsaya.com
Malaysia's First FREE Multi-Lingual Tax Software

for me i calculate like this ..

3.1% / 12 (1 year) = 1 (month) = 0.258%

1st month 5000 + 0.258% = 5012.9
2nd month 5012.9 + 0.258% = 5025.8
.
.
.
24th month = 5319.39

just use normal calculator

the easiest calculation......

5000 X 3.1% x number of days being put into the FD
---------------
365

for example

= (5000 X 3.1% / 365 ) X 730 days (2 years)
= RM310 ...

#this what i learned from banking training... dunno still applicable or not....

i think that's not applicable for compounding interest.

i found a calculator at http://www.csgnetwork.com/compoundsavingsintcalc.html

not sure if it's accurate tho.. 5000 become 9207.53 after 20 years, i rather invest in stock for 10 years.

the formula is

FV = PV ( 1 + i ) ^ n

so

5000 x ( 1 + (0.031/12) ) ^ 24 = 5319.39

with some minor differences because bank FD interested is calculated daily ie. the interest for February is

5000 x 0.031 / 365 x 28 = 11.89

and not

5000 x 0.031 /12 x 1 = 12.92

so entering a monthly compound FD on Feb and March will make some differences because your starting capital will make a difference in the compounding factor too ...

---

Added on May 5, 2008, 10:53 amanother rule of thumb for layman and banks ....

whenever you calculate 2 difference numbers, use the lower one

This post has been edited by mtsen: May 5 2008, 10:53 AM

first month interest = 3.1%/12*5000
second month interest = 3.1%/12*(first month interest+5000)

but i think you should use days instead of months for accurate calculation.



This post has been edited by weichong: May 5 2008, 11:04 AM

TS want to compound to 20 years (240 months)
Let's assuming 1 year has 365 days
What is the formula to count compounding interest for 7300 days?

lols... me too, nowadays FD not worth it... other investment can earn up a lot .......

msten formula is what i learn from training too...... i totally forgot that.....

Based on this formula FV = PV ( 1 + i ) ^ n. For those of you who are mathematically inclined, you can take the limit of this function as n approaches infinity and the number would end up as e (engineers should know this).

ie. lim (1+i) ^ n = e (for i<1)
n -> oo

So, actually even if the banks want to compound to the second, the difference is not much...

It has been a long while since I practise my math, so I could still be wrong.. Someone please verify.

Thank you.

when u r not sure, PLS do not simply list out ur formula...

u r right....a financial calculator can do it faster using FV.

did he mention 20yrs?

it's easy to recommend and suggest without knowing how the bank runs your number..

there're few ways how an fd are calculated by the banks (courtesy of what i've learnt at MNRB).. one of the more commonly used method is the "365 method" (but bank are smart too as any subsequent leap year may render additional profit/loss by using such calculation)

you practically take every single day as a unit that makes up the entire year (so february for example, will earn you less interest.. as opposed so simply divide it with 12 equal month)

however, the what makes it interesting is the treatment of the interest paid. if you choose to rollover/re-invest.. that adds to your compounding difference.

so mtsen illustrated this "365 method"

Fixed Deposit Account
An account that earns you interest at an agreed rate, based on the sum of money deposited. Fixed deposits are loan arrangements where a specific amount of funds is placed on deposit under the name of the account holder. The money placed on deposit earns a fixed rate of interest, according to the terms and conditions that govern the account. Fixed deposits are a credible way to make a return on investment. The great thing about fixed deposits have to be the interest rates. Some fixed deposit interest rates can be as high as 50%[SIZE=7] - that's enormous in the interest rate world. The interest rates will be like and you can kick back and watch your money grow over time. The what makes it interesting is the treatment of the interest paid if you choose to rollover/re-invest.. that adds to your

Please use existing FD thread in pinned section.
Ty.