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interest calculations
August 1, 2017
7:50 am
yuj
Ontario
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Term 1 Year 18 Mths 2 Year 5 Year
Annual compound 2.75 2.85 2.95 3.25
Semi-annual 2.70 2.80 2.90 3.20
Monthly 2.65 2.75 2.85 3.15

I know these rates (annual vs semi-annual vs monthy) per term are almost equal
but what are the actual rates and the formulae to calculate so as to choose the highest return (annual vs semi-annual vs monthy)?

August 1, 2017
2:43 pm
AlainJF
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Effective annual interest rate = (1 + (nominal rate / number of compounding periods)) ^ (number of compounding periods) - 1

ref: http://www.investopedia.com/te.....terest.asp (with a video !)

ref: https://en.wikipedia.org/wiki/.....erest_rate

August 1, 2017
3:15 pm
2of3aintbad
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As for the monthly and semi-annual rates, you need to differentiate between compounding and not compounding. People choose the monthly option often because they are expecting to spend the interest payout, rather than reinvesting it, either compounding or at the current rate. In fact, I'm not sure that there are compounding monthly GICs, only savings accounts.

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