1. What is AER Monthly Interest?

AER (Annual Equivalent Rate) Monthly Interest calculates the monthly interest earned on an investment or savings account based on the annual equivalent rate. It accounts for compound interest and provides the actual monthly return.

2. How Does the Calculator Work?

The calculator uses the monthly interest formula:

Where:

• \( P \) — Principal amount ($)
• \( AER \) — Annual Equivalent Rate (%)

Explanation: The formula converts the annual rate to a monthly equivalent rate using compound interest principles, then calculates the monthly interest on the principal amount.

3. Importance of Monthly Interest Calculation

Details: Understanding monthly interest helps in financial planning, comparing different savings products, and projecting investment growth over time. It provides a clear picture of monthly earnings from savings or investments.

4. Using the Calculator

Tips: Enter the principal amount in dollars and the AER as a percentage. Both values must be positive numbers (principal > 0, AER ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between AER and APR?
A: AER (Annual Equivalent Rate) shows the interest you'll earn on savings, while APR (Annual Percentage Rate) shows the cost of borrowing including fees and charges.

Q2: Does AER include compound interest?
A: Yes, AER takes compound interest into account and shows what you would earn over a year if interest was paid and compounded each month.

Q3: Why calculate monthly interest from AER?
A: It helps you understand your actual monthly earnings and compare different savings accounts more accurately.

Q4: Is monthly interest the same for every month?
A: With compound interest, if you leave the interest in the account, each month's interest will be slightly higher as it's calculated on a growing balance.

Q5: Can I use this for investment calculations?
A: Yes, this formula works for any investment or savings product that quotes an AER, including savings accounts, bonds, and certain investment funds.