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Determine interest amount
You have to know the entire amount that will be getting interest with every financial instrument as the first step to calculating interest. Then, referring to the specific product itself, determine whether its interest is calculated on a simple or a compound basis.
Simple interest is a one-time fee of a certain percentage paid on top of the principal amount. Whenever you have Compound interest, the interest builds on itself. The idea is that it resets the principal to the balance with the interest added on at the end of every period. There are daily, weekly, monthly or yearly periods you are able to choose from. The loan itself will determine this.
Getting simple interest determined
Divide the rate of interest by 100 to get a decimal figure with simple interest. For example, if a loan is paid back at 8 percent interest, the interest would be expressed as
How does compound interest work?
Maybe you will pay 8 percent compounded monthly. You owe $540 after the first month of interest. That $540 is the brand new principal after that though. Eight percent becomes $43.20 off the $540 principal. You have to pay more than $540. When added together, $583.20 becomes the brand new owed balance.
Formula for compound interest
You could need to determine what compound interest looks like over a long time period. A formula can help with this. First add 1.0 to your rate of interest. That means that your
Figuring out dividends
In an investment, such as in the purchase of stocks, the percentages earned are called dividends. The yield is what you earn in percentage from a stock in one year.
If you purchase stock that has traditionally remained steady and paid out regular dividends — let's say we paid $23.30 per share for the stock — that has a 6.3 percent (.063) yield, you can reasonably expect to make 6.3 percent of your stock's value in one year, or $1.47 per share.
You need to check the calculation of this when checking investment values since the stock market changes every day. Just use the same formula but replace the amount per share you paid with the current industry value.