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Respond to the discussion I come across the same question many times everyday at the bank where I am working. Interest Rate and Annual Percentage
Respond to the discussion I come across the same question many times everyday at the bank where I am working. Interest Rate and Annual Percentage Yield (APY). I have been asking this question from the bankers many times but I wasn't able to have a satisfactory answer from anyone there. After studying and looking for the discussion, it has been clarified to me and now I can confidently have a conversation with my customers. As per discussion of my colleagues, I would like to add some more (or would say add my understanding), Compound interest is the yield when the interest also earns interest along with the principal amount after each period of compounding. If it's a semi-annual, interest plus principal will be paid at the end of the sixth period and then principal + interest will earn interest i.e. interest on interest. Obviously in Jose's case, it's going to be more beneficial to go with the compounding quarterly than semi-annually because at the end of each quarter, interest plus principal amount will be added together and will earn interest and then at the end of the sixth month, the interest of the previous quarter will be considered a principal
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