Dear readers, currently there is a galore of good high fixed deposits on offer to retail individuals
Many of these fixed deposits pay respectable decent interest, averaging 2% per annum.
But investors must really take note whether a 2% per annum interest fixed deposit pay them 2% interest upon maturity.
For examples, are the following three 2% interest per annum fixed deposits the same?
- a 2% per annum interest 8-month fixed deposit
- a 2% per annum interest 12-month fixed deposit
- a 2% per annum interest 18-months fixed deposit
On first glance, each fixed deposit in a), b) and c) pays 2% interest per annum and this is a fact.
But on closer look, the fixed deposit in a) only pays 1.33% interest upon maturity, the fixed deposit in b) pays exactly 2% interest upon maturity while the fixed deposit in c) pays a higher interest of 3% upon maturity.
In fact, a bank can promote a fixed deposit with a higher fixed interest rate by compressing time horizon to attract attention.
What about a 4% per annum fixed deposit for 6-months? Which is in fact a 2% interest rate upon maturity.