how is bank interest calculated?

Question

for example, I’ve put in $8000 into the bank with 2% pa. in a month, the interest that I should have gotten is [($8000×2%)/12] = $13.33. however, I received $10.79. is there something wrong with my calculations or is this how banks work?

In: Economics

Answer 1

There is something called the APR or the annual percentage rate. So if the rate is 2% and you put $100 in for exactly a year you would have $102 at the end of the year, however to get to that figure you have to compound the monthly rate because you can get interest on the monthly interest if you leave the interest in the bank. – https://youtu.be/a22RkoupEgE