1. What is Monthly Interest Calculation?

Monthly interest calculation determines the amount of interest earned on a savings account each month based on the principal amount and annual interest rate. This helps savers understand their monthly earnings from bank deposits.

2. How Does the Calculator Work?

The calculator uses the monthly interest formula:

Where:

• \( P \) — Principal amount (PKR)
• \( r \) — Annual interest rate (decimal)

Explanation: The formula converts the annual interest rate to a monthly rate by dividing by 12, then multiplies by the principal amount to calculate monthly interest.

3. Importance of Interest Calculation

Details: Understanding monthly interest earnings helps individuals plan their savings, compare different banking products, and make informed financial decisions for better wealth accumulation.

4. Using the Calculator

Tips: Enter the principal amount in PKR and annual interest rate as a percentage. All values must be valid (principal > 0, rate ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: Is the interest calculated compounded or simple?
A: This calculator computes simple monthly interest. For compound interest, different calculations would be required.

Q2: Are there taxes on savings account interest in Pakistan?
A: Yes, interest income from savings accounts is generally subject to taxation according to Pakistani tax laws.

Q3: Do all banks in Pakistan use the same interest calculation method?
A: While the basic principle is similar, some banks may use daily balance methods or different compounding frequencies.

Q4: How often do banks pay interest on savings accounts?
A: Most banks in Pakistan pay interest on savings accounts on a monthly or quarterly basis.

Q5: Can interest rates change during the year?
A: Yes, banks may adjust interest rates based on State Bank of Pakistan policies and market conditions.