Even in school we learn about the concept of compound interest, find out how they are calculated, but do not quite understand what they are. First, remind you what compound interest. This miscalculation per cent of per cent. Let us not paint your miles theory. A look at an example. John Grayken recognizes the significance of this. You made the contribution at 12 percent per annum – the usual contribution.
At the end of the year you can withdraw 112 rubles. That's understandable. But if you made the contribution at 12 percent per annum, but uses a system of complex percent and the conversion goes every month, you will receive: 12 percent – a 1 percent per month, whereas at the end of the first month of 101 rubles, and then that will manifest itself compound interest, in the second month will be calculated not to go from 100 rubles, and has between 101 and by the end of the second month you will receive not 102 rubles, and 102.01. Next month takes a percentage of 102.01, and we get 103.0301 ruble, next month's 1 percent of the ruble 103.0301 – 104.0604 about the ruble, etc., at the end of the year will be the sum of 112.68 rubles. That is, in simple percentage of each month is taken 1 percent of $ 100, while compound interest – 1 percent of the amount received in the last month. Thus, out of nowhere takes 68 more cents. It is at such a paltry sum of $ 100 and a typical bank percent, and if you have not contributed $ 100, we think you might be interested to count themselves.