Description

Assumptions

• It does not take into account any possible account fees.
• It does not take into account income tax payable on interest earned.
• Interest rate does not change over the saving term.
• Interest is calculated by compounding on the same deposit frequency selected, i.e. weekly, fortnightly, monthly. In practice, interest compounding frequency may not be the same as deposit frequency.
• It is assumed that a year consists of 26 fortnights or 52 weeks which is counted as 364 days rather than 365 or 366 days.
• No rounding is done throughout the calculation, whereas the account balance is rounded to at least the nearest cent in practice.