There is a lot of financial or investment tools in the market to help you achieve your financial goal with a peace of mind. However, some unscrupulous financial advisors or agents may just be more concerned about their sales target or bottom line instead of yours might feint you if you totally have no idea on the concept or calculation of compound interest (time value or money).
For example, investment advisor who just wanna close the sale may mislead you about the actual return of a saving plan, such as plan where you save $10,000 in one lump sum, and after 20 years you can get back a total return of $20,000. On paper, 20k return – 10k capital will equal to 10k profit. 100% profit divided by 10 years period equal to 10% interest rate annually. Is it true? No, this is definitely a misleading calculation for compounding interest. To stay away from the financial trap, you’re strongly advised to learn more about the how compound interest works. For your knowledge, it’s possible to use some Microsoft Office Excel functions to easily, accurately calculate the exact rate related to time value of money.
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