Banking

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Banking; How to make sense of the interest rate
Topic Started: Dec 18 2009, 07:16 PM (1,095 Views)
Ferrous	Dec 18 2009, 07:16 PM Post #1
The Chess Piece Posts: 1,345 Group: Members Member #4,157 Joined: November 16, 2009 City Paris Company Name Barzel Industries Political Party The State	[Note to Mods: Please pin this. This topic seems to have come up several times in the suggestions, help, and now gameplay discussions. I assume that sooner or later there will be a guide or a FAQ on these forums and this can just get added into it when that time comes. Should Admin decide to change the mechanics in the game, I'll likely update this.] Alright boys and girls, I'm going to explain this only one more time. Any time anyone asks this question again, I'll point to this thread. I'm not going to give you a formula. I'm not going to give you the answer. I'm going to show you how this is done. This is how you figure what's happening with the bank interest rate. Get out a pencil, some paper, and a calculator. I'll teach this to you so you never have to wonder about looking up a formula for this again. Don't worry, it's not nearly as hard as it looks. At the risk of looking tedious, I'm going to spell it out in detail. If you can't get it after this, then either English isn't your first language or you are simply lazy. Take a deep breath. Math is not scary. On your screen at the bank, you'll see that there is an interest rate of ".01%" for every work cycle. Yes, that's .01%, not 1%. That means if you have $100.00 in the bank, and you work one work cycle, you now have $100.01. You've earned a cent. With me so far? Good. Mathematically, here is what just happened: You got $100 in the bank. To figure out what .01% of $100 is, simply multiply the two (keep in mind that .01% is equal to .0001): (.0001)($100) = $.01 (you shouldn't need your calculator for this part, but if you must, you must) So now, you have that cent plus what you had in the bank, or: (.0001)($100)+$100 = $.01+$100.00 = $100.01 Fair enough. But now let's simplify that first expression: (.0001)($100)+$100 = $100(.01+1) = $100(1.0001) Interestingly enough, the number that you should get is $100.01. Follow me so far? If not, go through what I've said and plug in the numbers. Okay, now you still have that $100.01 in the bank. And now you work another shift. Your interest rate is .01%, so now that gets applied to what you have in the bank, or in other words, another $.01. Now, after working, you have $100.02 in the bank. You've earned another cent. (you should use the above formula in blue, except that instead of $100, you should put in $100.01) Alright, simple enough. Now here is the really cool thing. The interest rate is considered a "compound" interest rate. That means that instead of applying interest to only the initial $100 you have in the bank every time you work, it applies interest to whatever you have in the bank every time you work. In other words, if you have $1,000,000.00 (yes, a million) in the bank before your first work cycle, you will now have: $1,000,000.00(1.0001)=$1,000,100.00 Sweet. $100. Okay, now leaving that money in the bank, you work another cycle: ($1,000,000.00(1.0001))(1.0001)=$1,000,100.00(1.0001)=$1,000,200.01 Notice, you just earned $100.01 the second time - one cent more than you did the first time. That's because the interest rate compounded what you had in the bank. Instead of just working off of initial million you had in the bank, the interest worked off of whatever you had in the bank. Cool. Your money earns even more money. But now, let's say you had that $1,000,000, and you wanted to figure out how much you would earn in four work cycles. Okay... let's just apply what we've learned so far: After one work cycle: $1,000,000.00(1.0001)=$1,000,100.00 After two work cycles: ($1,000,000.00(1.0001))(1.0001)=$1,000,200.01 Allowing for simplification: ($1,000,000.00(1.0001))(1.0001)=($1,000,000)(1.0001)(1.0001)=($1,000,000)(1.0001)² After three work cycles: (($1,000,000)(1.0001)²)(1.0001)=(($1,000,000)(1.0001)(1.0001)(1.0001))=($1,000,000)(1.0001)³ After four work cycles: (($1,000,000)(1.0001)³)(1.0001)=(($1,000,000)(1.0001)(1.0001)(1.0001)(1.0001))=(($1,000,000)(1.0001)⁴) So now, lo and behold, you have a formula for figuring out how much money you'll have in the bank after a given amount of work cycles. For any 'X' amount of work cycles, and any 'Y' amount of money you initially have in the bank, this is how much money you will have in the bank after X work cycles with an initial amount of Y money: (Y)(1.0001)^X=What you would have So if you have $100 in the bank (Y = 100) and you want to know how much money that will turn into after a year of sitting in the bank, assuming that you work twice a day (365 days, with two work cycles a day, or 730 work cycles = X) you get: (Y)(1.0001)^X=(100)(1.0001)⁷³⁰=107.57 There. Now you know.



Akiha	Dec 18 2009, 08:04 PM Post #2
Sage of Eternity Posts: 6,423 Group: Mumbai Mayor Member #78 Joined: July 20, 2006	I'd just like to add that the cap for bank accounts is $50,000 You will never get more than $5 interest per work cycle. IF you have 50k then the interest would amount to roughly an extra $300 per month. However considering the average wage at the moment...even with donations, saving 50k would realistically require a long term effort over the course of 5 or more years if you are really frugal. Then it would take more time to catch the non-savers and surpass them. Chances are that this game will have closed long before anyone can save 50k and do something meaningful with it. Do you dare to take the long term gamble? Edited by Akiha, Dec 18 2009, 09:42 PM.



TheStig	Dec 19 2009, 03:48 AM Post #3
His Stigship Posts: 1,805 Group: Members Member #4,126 Joined: November 15, 2009 City Rome Political Party Albion	Yeah, the bank is a pretty useless feature really. The only use I can really think of is hiding all your cash in the bank if there are a ton of criminals on the loose. Personally I'd just use that day's work money to get the hell out of there.



tankshock	Dec 19 2009, 04:55 AM Post #4
Madness is Infectious Posts: 2,230 Group: Members Member #3,542 Joined: January 4, 2008 City Sydney Company Name Standard Goods Political Party Sydney Protection Party	nice guide Ferrous, although I tend to agree with TheStig in that its a useless feature as of now and in the foreseeable future.



Ferrous	Dec 19 2009, 11:29 AM Post #5
The Chess Piece Posts: 1,345 Group: Members Member #4,157 Joined: November 16, 2009 City Paris Company Name Barzel Industries Political Party The State	It's not meant as a "guide" per se, but people have been asking what .01% interest rate means, so it's just to explain it. No, I do not advocate for actually using it as an investment tool. Just explaining the mechanics.



princecaspian	Dec 19 2009, 08:32 PM Post #6
Prince of London Posts: 2,415 Group: Members Member #112 Joined: July 20, 2006 City London Company Name Albion Games! Political Party Gebler	tankshock Dec 19 2009, 04:55 AM nice guide Ferrous, although I tend to agree with TheStig in that its a useless feature as of now and in the foreseeable future. We could expand it with CDs, checking accounts, and other basic services most financial institutions offer.



Ferrous	Dec 20 2009, 05:56 PM Post #7
The Chess Piece Posts: 1,345 Group: Members Member #4,157 Joined: November 16, 2009 City Paris Company Name Barzel Industries Political Party The State	princecaspian Dec 19 2009, 08:32 PM tankshock Dec 19 2009, 04:55 AM nice guide Ferrous, although I tend to agree with TheStig in that its a useless feature as of now and in the foreseeable future. We could expand it with CDs, checking accounts, and other basic services most financial institutions offer. I don't think that would be a bad idea, although I would humbly suggest that you make your suggestions in this thread: http://forums.cybercitizens.com/topic/6663203/1/ (please don't mind the mudslinging between me and Cam)



Kybernetes	Dec 21 2009, 09:33 AM Post #8
Prince of New York Posts: 591 Group: Members Member #4,121 Joined: November 15, 2009 City Paris Company Name Le Company Political Party The Republic	Hey now, English is not my first language and I still understood this.



JoshuaR	Dec 21 2009, 02:12 PM Post #9
Increasing Complexity Posts: 1,449 Group: Members Member #4,166 Joined: November 17, 2009 City Paris Company Name Perfect Item Enterprises Political Party The Republic	Hehe, now I have another question. Where does the game round off? If I earn interest of less than a cent, will it be there in my account, or will the game just say that I still have my initial investment, in which case I never earn interest at all until I have enough in the bank to earn what the game recognizes (through rounding) as a cent?



Ferrous	Dec 21 2009, 02:24 PM Post #10
The Chess Piece Posts: 1,345 Group: Members Member #4,157 Joined: November 16, 2009 City Paris Company Name Barzel Industries Political Party The State	JoshuaR Dec 21 2009, 02:12 PM Hehe, now I have another question. Where does the game round off? If I earn interest of less than a cent, will it be there in my account, or will the game just say that I still have my initial investment, in which case I never earn interest at all until I have enough in the bank to earn what the game recognizes (through rounding) as a cent? I believe that it's the first case. I think the game only recognizes the money that is in the bank account - what you can actually see - and not any hidden interest accrued. As far as I'm aware, the game will not let you have less than a cent in the bank. I'm not certain if the bank rounds at all. Really, I don't care since the amount of money you'd get even if it did round $.005 is still minimal, but to be fair, it does make the difference between earning interest at $50 and earning interest at $100.



Mr.Hunt	Dec 29 2009, 10:00 PM Post #11
where it is at Posts: 3,321 Group: Members Member #1,848 Joined: October 26, 2006 Political Party Freemasons	helpful explanation, thanks!



Hysterian	Dec 29 2009, 10:06 PM Post #12
contact: erotisch80@hotmail.com Posts: 4,163 Group: Members Member #759 Joined: August 30, 2006 City London Political Party Gebler.	Pinned.



Indra Saputra II	Dec 30 2009, 05:40 AM Post #13
Extraordinary Citizen Posts: 60 Group: Members Member #4,368 Joined: December 24, 2009 City New York Company Name The Company Political Party The State	thank you



Devilghost	Jan 6 2010, 04:29 PM Post #14
Chaos team Posts: 714 Group: Members Member #4,294 Joined: December 5, 2009 City Rome Company Name Devilghost's self service Political Party Inmates of America	i have to say something Good job but you spend a lot time writing guides about cc also , i didnt read banking guide ,this is big also.



Ferrous	Jan 6 2010, 09:06 PM Post #15
The Chess Piece Posts: 1,345 Group: Members Member #4,157 Joined: November 16, 2009 City Paris Company Name Barzel Industries Political Party The State	Devilghost Jan 6 2010, 04:29 PM i have to say something Good job but you spend a lot time writing guides about cc also , i didnt read banking guide ,this is big also. I get bored at work sometimes.


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