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cosmic dust
21-11-2005, 11:16 AM
Anyone know how to calculate compund interest? What is the formula?

If I put RM300 into a saving account every month for the next 10 years (120 months), assuming a fixed interest rate of 5% p.a. for the entire period and the interest is daily rest (calculated daily), what will my balance be at the end of 10th year?

trex92
21-11-2005, 11:57 AM
Anyone know how to calculate compund interest? What is the formula?

If I put RM300 into a saving account every month for the next 10 years (120 months), assuming a fixed interest rate of 5% p.a. for the entire period and the interest is daily rest (calculated daily), what will my balance be at the end of 10th year?

Balance end of 10 years = 300 x (1.05)power 10 = RM488.67

Bigjoe
21-11-2005, 12:13 PM
Cosmic dust, you are actually calculating the future value of an annuity savings plan. The first monthly contribution future value

is FV =300*(1+(5%/365))^(# of days to maturity)

You need to add up all the FV value of all 120 contribution to get the answer.

Timo
21-11-2005, 12:21 PM
There are probably some formulas out there that can help you but I can't be bothered looking them up.

Continuing on the replies above :

Bigjoe's formula is correct for a single initial deposit, so, if you left RM 300 in the bank @ 5% per annum compound interest calculated daily, your end result would be :

RM 494.60

This is slightly different from the no given by trex92 because his formula is calculated YEARLY.

As for your question, if you put in RM 300 per month for 10 years, the calculation is more tricky. You end up with a power series, to which I can see no simple analytical solution (although I am probably wrong).

However, it can be solve numerically (that's what computers are for after all), and the end result is that you will have :

RM 46804

This is using a simplifaction of 1 year = 12 months, 1 month = 30 days.

If you did not put the money into the bank all you would have is 'only'

RM 36000

I hope that helps.

gnehkgnep
21-11-2005, 01:05 PM
I was informed unit trust (Public Mutual) is giving at least 8% per annum for the last 5 yrs......can i say that it will be a better option than investing in fixed deposit......? :D

SunwayKid
21-11-2005, 01:22 PM
I was informed unit trust (Public Mutual) is giving at least 8% per annum for the last 5 yrs......can i say that it will be a better option than investing in fixed deposit......? :D

Depending on which unit trust lah......My mum invested RM5k of her pension fund in their unit trusts (used to be call KL Mutual than) about 10 years ago and despite all the bonus units, she has not yet recover her initial investment. The last time I checked her statement, it was still worth only $4k plus. :(

pcyeoh
21-11-2005, 01:43 PM
I was informed unit trust (Public Mutual) is giving at least 8% per annum for the last 5 yrs......can i say that it will be a better option than investing in fixed deposit......? :D

Just like the cigarrette warning sign printed on every pack of cigarrette sold, there is also a similar warning published in every unit trust marketing material the following words " Investors are advised to read and understand the Prospectus of our funds before investing. The prices of units and distribution payable, if any, may go down as well as up. The past performance of a fund should not be taken as indicative of its future performance. Neither the Manager nor the trustee guarantees the performance of any of the funds or the repayment of capital. You should also note that there are fees and charges involved in the buying and selling of units and investors are advised to consider these fees and charges carefully before making an investment decision." So there is no such thing as "Public Mutual is giving at least 8% per annum for the last 5 yrs......" But you may be right to say compared to fixed deposit, unit trust performance is better than the returns from fixed deposit provided it is being managed well. For FD, it doesn't take a rocket scientist to manage to it but in the case of unit trust, if it is not managed well by your agent, then it will be like the case of SunwayKid's mum where her RM 5,000 became RM 4,000.

Bigjoe
21-11-2005, 04:37 PM
Unit trust can be a better investment than putting your money in a bank. However, it depends on the fund you invest. You basically have to choose a fund that invest in things you understand and believe in. For example if you believe that blue chip will do well, put it in a fund that invest in blue chips ONLY. If you believe that real estate will do well, put it there then.

For my record, I don't think any investment, available to average person, in Malaysia available beat residential real estate. So if you have money, consider buying a residential real estate first above anything else.

patrick
21-11-2005, 06:14 PM
Unit trust can be a better investment than putting your money in a bank. However, it depends on the fund you invest. You basically have to choose a fund that invest in things you understand and believe in. For example if you believe that blue chip will do well, put it in a fund that invest in blue chips ONLY. If you believe that real estate will do well, put it there then.

For my record, I don't think any investment, available to average person, in Malaysia available beat residential real estate. So if you have money, consider buying a residential real estate first above anything else.

In general I may agree with you. But do take into consideration opportunity cost and return on investment too. I note that many people, when looking at property, just look at the appreciated value. They dont take into consideration the returns from other optional investments. They also do not take into consideration present income generation and do not take into consideration of holdings costs on their property whilst awaiting capital appreciation.

Just my two bits.

GreenBug
21-11-2005, 06:20 PM
For my record, I don't think any investment, available to average person, in Malaysia available beat residential real estate. So if you have money, consider buying a residential real estate first above anything else.Unless you finance the property purchase using the Mortgage Plus II loan scheme from that Big, Strong and Friendly Chartah Bank.... :eek: