- 1). Divide your yearly interest rate by 100 to convert from a percent to a decimal. For example, if you have a bank account that pays 2.52 percent interest per year, you would divide 2.52 percent by 100 to get 0.0252.
- 2). Calculate the periodic interest rate by dividing the yearly rate by the number of times per year interest is compounded. For example, if you have a bank account that pays 0.0252 interest per year and pays interest quarterly, you would divide 0.0252 by 4 to get 0.0063 as the quarterly interest rate.
- 3). Add 1 to the periodic interest rate. In this example, the periodic rate is the quarterly rate, so you would add 1 to 0.0063 to get 1.0063.
- 4). Calculate the result from Step 3 raised to the power of the number of compounding periods. In this example, the number of compounding periods would be equal to the number of quarters you were going to leave the money in the account, so if you were going to leave it in for six quarters, you would raise 1.0063 to the sixth power to get 1.038400375.
- 5). Multiply the result from Step 4 by the original sum of the investment to find out how much the investment will be worth. In this example, if you invested $22,000, you would multiply $22,000 by 1.038400375 to find the final value will be $22,844.81.
- 6). Subtract the original sum from the value from Step 5 to find the return. Finishing the example, you would subtract $22,000 from $22,844.81 to find that your return would be $844.81.
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