The annual interest rate, as its name implies, is the ratio of calculating a certain amount of interest for one year.

For example, your deposit is 100 yuan.

The bank promised to pay you an annual interest rate of 2%

Then the bank will pay you 2 yuan interest next year.

The formula is 100 * 2% = 2 yuan.

However, if the bank stipulates that it should be paid once every six months and twice a year.

Then the interest you can receive every six months becomes 1 yuan.

The calculation formula is 100 * 2%/2 = 1 yuan.

When you buy corporate bonds that pay interest twice a year from a bank,

Half-year interest is calculated by this formula.

By analogy, what if interest is charged once a month?

The calculation formula is100 * 2%/12 = 0.17 yuan.

When you apply for a time deposit with principal and interest at the bank,

The monthly interest is calculated by this formula.