Deposit income calculator. Takes your investment amount, nominal annual interest rate, deposit time and some more settings and calculates your income. Shows period-by-period income capitalization/compound.
What is the meaning of each calculator field ?
- Deposit amount - the amount of money, which you have invested in. This is your capital, which will be increased by some percentage (interest rate) agreed in the deposit contract.
- Deposit time - how long your money will be deposited in the bank. After this period you'll get your money back (increased by interests). This period should be defined by the deposit contract. Common deposit periods vary from few weeks to few years. However, some banks offer deposits for one day only or even 10 years. Most common periods are round numbers e.g. one week (7 days), two weeks (14 days), one month, three months, half of year, one year or more.
- Nominal annual interest rate - your deposit would increase by that percentage if deposit time was one year. This value should be regulated by deposit contract. If deposit time is less than one year you get proportional part of annual interests. For example if deposit time is one month you'll get 1/12 of annual interest.
Annual interest rate is 10%. After one year we'll get back our capital (deposit amount) increased by exactly 10% (deposit interests). If deposit time is half of year, then we'll get back capital increased by half of annual rate i.e. 5%. If deposit time is one day, then we'll get capital increased by 1/360 or 1/365 of annual rate depending on rules applied by your bank and law in your country.
- Why interest rate is calculated for one year (annual rate) ?
Short answer: because it's simple way to compare two deposit offers. If we have two deposits with different deposit time, then we can compare them easily without any additional calculations.
- Capitalization - this tells us when and how frequently our capital (deposit amount) is increased by interests. Interests can be accumulated for next capitalization period or payed out directly each time depending on deposit contract. In the simplest case there is only one capitalization at the end of deposit time e.g. we get captial incresed by 10% after one year. However, there are two main scenarios what to do with interests after each cycle:
If deposit time is divided into several capitalization cycles, then we say, that deposit has capitalization for given cycle.
- pay out interests and create new deposit with the same deposit amount as before (see annuity deposit),
- increase captial by interests and use it to create new deposit (so interests are accumulated in this case)
If deposit time is one year divided into 12 capitalization cycles, then we say that deposit has monthly capitalization
- Days in year - it is agreed number of days in a year. It's a lot easier for calculation purposes, to agree that year is 360 days, as this means 12 times 30 days. However, real year will have 365 (or 366) which is less convenient to compute. It's all about specific country regulations and the bank agreement itself.
- Capitalization cycles number - how many times interests are calculated:
- Example 1:
Deposit time is one year and there is only one capitalization cycle. In this case we simply get back invested capital increased by interests at the and of deposit time i.e. after one year.
- Example 2:
Deposit time is one year, but capitalization is monthly. In this case interests are calculated each month increasing your capital. So, there are 12 capitalization cycles.
- Interest - sum of all interests calculated within whole deposit time.
- Effective APR - this is interest rate taking into account capitalization i.e. incresing deposit amount after each cycle.
Example: Deposit time is 1 year, interests are calculated monthly and nominal annual interest rate is 8%. Capital is increased each month by interests, so interests are greater and greater each month. Finally, effective annual percentage rate (APR) is 8.3%
History of changes, improvements and fixes to this calculator
2015.05.03 New feature: We now support week based computation for deposits. You can now set deposit time in days/weeks/monts and years, and also capitalization time may be set to "compund weekly".
2015.01.21 New feature: 360 or 365 days in a year may be selected now. Different banks rules, different per-country regulations, different banking systems - some use 360 days in a year, some other use 365.
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"Calculla v1" version of this calculatorIn December 2016 the Calculla website has been republished using new technologies and all calculators have been rewritten. Old version of the Calculla is still available through this link: v1.calculla.com. We left the version 1 of Calculla untouched for archival purposes.
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