Quote:
|
Originally Posted by parafly
Hi,
This is starting to confuse me. Say I start with $1000 balance, and I let the account sit for an entire year. Would I be right to assume my balance after one year would be $1038 if the APY is 3.8%? Can someone please explain to me how the interest is calculated, and how much I could make in interest if I deposit about $1000 / month into the account?
Thanks in advance.
|
Say you start with $1000, the interest rate is 3.74% and the APY is 3.8%.
ING compounds the interest monthly. This means that the interest earned at the end of the month is added to your balance and the bank now calculates your interest for the next month using the new balance.
After month 1, you will earn (1000 x 3.74% / 12 ) = 3.12
To be exact, you need to divide the annual interest by 365 and multiply by number of days in the month to calculate the interest earned for the past month.
New balance = 1003.12
After month 2, you will earn(1003.12 x 3.74% / 12) = 3.13
New balance = 1006.25
After month 3, you will earn(1006.25 x 3.74% / 12) = 3.14
After month 4, you will earn(1009.39 x 3.74% / 12) = 3.15
After month 5, you will earn(1012.54 x 3.74% / 12) = 3.16
After month 6, you will earn(1015.70 x 3.74% / 12) = 3.17
At the end of 12 months, you will have earned about 38.1 in interest which translates to about 3.8% APY.
Here's another website that may help. There's actually formulas that you can use to
http://banking.about.com/od/savings/a/apy.htm
Hope this helps!