I would like to calculate the interest generated from an investment within a time period of 8 months. The bank manages an interest rate of 3.5% p.a. for six months, and the last two months is 1%. The interests are compounded quarterly. Furthermore, the special rate (3.5%) starts in the middle of the third quarter (August).
The next table would summarize the issue:
|3.5% p.a.||3.5% p.a.||3.5% p.a.||3.5% p.a.||3.5% p.a.||3.5% p.a.||1% p.a.||1% p.a.|
I've tried to calculate the rates by transforming the yearly interest rate into a monthly interest rate and then adding them:
- Transform the 3.5% p.a. to a monthly rate, which equals ~ 0.28709%
- Applied this rate from Aug to Jan
- Applied monthly rate equivalent to 1% p.a. (~ 0.08295) to Feb and Mar
Nonetheless, I'm quite sure this is not a correct procedure, because the interests are compounded quarterly and not monthly.
While looking through the internet, I searched for a formula that takes into account two different rates within the same compounding period, but I couldn't find anything.
How can I correctly calculate the generated interest?
Thanks a lot in advance for your help!