Capitalization is ... What is the capitalization of a deposit
Every modern person is faced with banking services. Distributed lending, issuing cards to receive payments and payroll. No less demand deposits - the provision of personal bank funds for storage at a certain percentage. This format of cooperation provides a unique opportunity to gradually increase the size of its capital. Considering the proposals of financial institutions, it is worth considering the question which of them is the most profitable. And then it is impossible to do without such a thing as capitalization. This is a compounding percentage, which we consider in detail below.
What is capitalization?
The capitalization of savings is a quarterly or monthly increase in a deposit by adding to the account interest on a deposit that is accrued by a financial institution in accordance with the terms of the contract. This scheme provides for an intensive increase in capital, since each subsequent interest is not on the primary capital, but on capital, to which interest has already been added.The category of deposits turns out to be more profitable than the one according to which payments to customers are made monthly. The peculiarity of the product is that the capitalization rate is an order of magnitude lower than that available for standard deposit programs. The specifics of the partnership is based on the desire of the financial institution to protect itself from losses.
Who is the capitalization of interest?
Capitalization is the accrual of interest on interest. The profitability of the proposal is not so difficult to evaluate, but not everyone is happy with this format of partnership. There is a category of people who make deposits in order to create an additional source of income. For them, monthly payments are a prerequisite of partnership. Considering capitalization in their situation does not make sense. Another thing, when the main purpose of opening a deposit is to increase capital. Capitalization is the very service that will allow you to accumulate funds several times faster. A universal partnership format here will be a program of deposits not only with capitalization, but also with the possibility of replenishing an account.Most programs provide for the possibility of replenishing the deposit with an amount not exceeding the initial contribution. The accrual of interest on interest will be beneficial only for a certain category of customers and practically useless for another.
Formula for calculating compound interest
The capitalization of an account, both rechargeable and non-rechargeable, is a systematic interest on interest. Compound interest is calculated using the specialized formula:
SUM = SUM0 * (1 +%) * N
- SUM - total deposit amount.
- SUM0 - the volume of the primary contribution.
- N is the number of capitalization periods.
- % - interest rate identical for each of the capitalization periods.
To calculate the interest rate, it is customary to use a completely different formula:
% = p * d / y
- P is the annual rate divided by 100%;
- d - capitalization period;
- y is the number of days or months in a year.
The formula is relevant regardless of the additional terms of the deposit agreement, in particular, the possibility of replenishing the account.
How to calculate the compound interest and what is the help of bank employees?
If earlier the capitalization rate and the total deposit amount were calculated using a specialized formula, today a special deposit calculator can be used to determine the total deposit value.This is a special program that in a matter of seconds is ready to show the profitability of a bank product. All that is required of a client of a financial institution is to fill in the appropriate fields: the size of the primary deposit, the term of partnership with the bank, the interest rate. It is important to clarify with the staff of the financial institution whether interest is accrued on the first and last days of the partnership. This may affect the final result, even if it is insignificant. Calculation of the deposit, which provides for market capitalization, can be carried out by an employee of the bank. A representative of a financial institution has the right to make calculations. As for informing about the most profitable banking product, it is prohibited. A potential client must make their own decisions.
How to get the maximum benefit from a deposit?
Capitalization is a charge on the contribution of compound interest, a service that allows you to get the maximum benefit from a partnership with a bank. For maximum profit, experts recommend placing a large amount of funds in a bank account for a period of at least one year.Deposits issued for shorter periods of time do not bring substantial income. The optimal amount of investment is not less than 100 thousand rubles. For clarity, one can compare two deposits for a specified amount with a rate of 11 percent with or without capitalization. At the end of the standard deposit agreement, the bank's client will receive 111,042 rubles, the program with capitalization will bring 111,585 rubles. At first glance, the insignificant difference will increase as the base capital grows and as the partnership with the bank extends.
What currency to open a deposit?
Capitalization of interest (what it is, as mentioned above) does not limit the opening of a deposit in any of the currencies of the world. In which monetary unit to open an account, will depend only on the purpose of partnership with the bank of each individual. Many experts recommend making deposits in the currency in which they will be spent in the future. On the other hand, given the unstable economic situation in the country, it is worth considering dollar partnership programs and deposits in euros. In any situation, the opinions of experts remain the opinions of experts, and a potential client of the bank must make their own decisions.
What is market capitalization?
Market capitalization is a comprehensive assessment of the economic value of all shares of an enterprise that are open for official trading on the stock exchange. From a formal point of view, a concept is a combination of three parameters simultaneously:
- Net assets of the company, which are the property of the owners of the company after full fulfillment of obligations to third parties.
- Managerial and technological culture of the company in terms of building a business, communication and reputation.
- Stable and high expectations of investors in the aspect of investment or speculative attractiveness of the company's securities as a commodity on the stock exchange.
Profit capitalization method in management
In financial management, various income capitalization operations are common. You can talk about the following areas:
- Capitalization of net incomeincluding the transfer of part of the funds for the development of production.
- Capitalization of value or net cash flow from investing. There is a redirection of funds for reinvestment.
- Capitalization of interest.What it is, discussed above.
- Capitalization of dividendswhich is due to dividend payments presented in the format of new shares of the company.
The method of capitalization of profit acts as a profitable approach to business valuation. It is based on the basic premise according to which a part of the property in the company corresponds to the actual volume of priority profit that the enterprise will bring in the future. Market capitalization is organized on the basis of the described techniques only when there is a sufficiently large amount of information on the assessment of profitability. You can define the concept as a retraining of cash flow in the cost by dividing or multiplying the calculated rate of profit flow by a factor or multiplier.