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How do you figure out if 12% annually is the same as 1% monthly?

First take a Future Value Calculator on “annual” and put in $100,000 at 12% for 1 year, and it shows the FV to be $112,000. 

Then take another Future Value Calculator set on “monthly” and put in $100,000 at 12% for 12 months, and it shows the FV to be $112,683. 

Most banks compound monthly, a few savings and loans compound quarterly, yet it is common to express interest rates in annual terms so it gets confusing.  There are hard money investments or bridge loans that express their payment in monthly terms, like 1% a month.

While the difference in this example is small, knowing that 12% annual and 1% monthly are not the same can help you understand the whole truth about your money.