Page 379 - F1 Integrated Workbook STUDENT 2018

Short term finance and investments

2.2 Interest bearing bank accounts

Interest on bank deposits accumulates on the principal sum invested. Interest is
added at specified regular intervals, such as every month, every three months, every
six months or annually. The frequency of adding interest affects the actual interest
yield on the investment.

2.3 Interest earned

You might be required to calculate the amount of interest earned on a deposit or
savings account within a particular period of time. If you are given the effective
annual yield (or if you are given an ‘annual yield’ with no further information), the
interest calculation is simply:

'
Number of days interest earned
Interest = Amount deposited × annualised interest rate ×
Annual day count

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