You deposit $2,000 in a savings account that pays 10 percent interest, compounded annually. $8354.5 (2000 x (1+.10)^15) will your account be worth in 15 years.
If you borrow $100,000 at 5% interest compounded annually, you would owe $5,250 after the first year on a principal of $105,000. This method involves calculating and adding interest to an investment or loan once a year rather than for a longer period.
However, due to compounding, annual interest is typically charged at a greater rate. The invested amount has a 12-month growth rate instead of a monthly payout. Take advantage of it if you can receive the same interest rate for monthly installments as you can for annual payments, though.
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