1. What is a Term Share Calculator?

Definition: This calculator computes the future value of an investment based on compound interest for term share accounts in Ontario.

Purpose: It helps investors understand how their money can grow over time with compound interest in term share accounts.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( A \) — Future amount (CAD)
• \( P \) — Principal investment (CAD)
• \( r \) — Annual interest rate (decimal)
• \( n \) — Number of compounding periods per year
• \( t \) — Time in years

Explanation: The formula accounts for interest being earned on both the initial principal and accumulated interest from previous periods.

3. Importance of Term Share Calculations

Details: Understanding compound growth helps with financial planning, comparing investment options, and setting realistic savings goals.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate (as percentage), compounding frequency (typically 12 for monthly), and time period in years.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal, while compound interest is calculated on principal plus accumulated interest.

Q2: What's a typical compounding frequency for term shares?
A: Most term shares compound monthly (n=12) or quarterly (n=4), but this can vary by financial institution.

Q3: How does compounding frequency affect returns?
A: More frequent compounding leads to higher returns, as interest is calculated on accumulated interest more often.

Q4: Are term share rates guaranteed?
A: Term share rates are typically fixed for the term duration, unlike regular savings accounts where rates may fluctuate.

Q5: What's the advantage of term shares over regular savings?
A: Term shares usually offer higher interest rates in exchange for keeping funds deposited for a fixed period.