Calculating Profit of Certificate of Deposit
Investing money in term deposit is a secure and guaranteed method to get higher interest for your excess money. Time deposit or certificate of deposit is a bank product almost same to savings account except money on term deposit is on lock-in period before you can get it.
One not good thing of putting money in time deposit is that you will be burdened a cost if you get your money before the maturity date. So you should not put all your savings in time deposit, you must leave a particular amount of money in your savings account.
One important thing in investing in time deposit is knowing how to compute the interest you can get in putting a certain amount of cash in a time deposit. Once you know the interest you will gain, you can have an idea what amount of money you will put in term deposit.
Time deposit is one of the guaranteed investments you can do for your funds. In the Philippines, time deposit is insured up to P500,000, in other words you cannot lose your principal money invested in time deposit.
To calculate the total interest gain in term deposit, you may use the equation underneath:
Net Interest = [(principal x rate x days) / 365]*0.8
0.8 comes from 1 minus 20% withholding tax
For illustration: P2,630 = [(P1 million x 0.04 x 30) / 365 ]* 0.8.
From the formula above, you can notice that to escalate your profit in investing in term deposit, you should beef up the days of time deposit and the capital you will invest. The interest rate of term deposit depends on the holding period. Definitely, the better the duration, the bigger the interest rate for term deposit will be.
These days you can choose where to invest your money based on the risk level and the percentage of profit. Several investments are very risky, others are average or without risk at all. Investing in term deposit is one of the investments without risk at all since it is guaranteed by the government.
For more information on how to make money and apply a bank account at Canara Bank, you must go India Bank blog for helpful articles on saving, investing and make money online.
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