Simple Interest VS Compound Interest

Simple Interest: Simple Interest is the interest calculated on the initial sum.

Compound Interest: Compound Interest is the interest calculated on the initial sum as well as on the accumulated interest from the previous periods.

My purchase

I will be buying a bracelet from the Love collection of Cartier. It is a golden bracelet in size 16 with 4 diamonds and engraving of my name. I have always wanted one because it can be a stylish statement piece. Since my name will be engraved, the bracelet will be personalized and I will truly feel like I own it. I will order it from the official site of Cartier.

Price: 25 100 bgn

https://www.cartier.com/en-us/jewelry/bracelets/love-bracelet-classic-model-4-diamonds-B6070017.html?dwvar_B6070017_size=16&quantity=1&po=engrav&pid=CRB6070016&hasEngrav=true&engravMessageFont=Cursive&engravLine1=Bella

Total Amount

The total amount will be 25 100 bgn, since the standard shipping is free and VAT is included in the price.

https://www.cartier.com/bg/OnePageCheckout/Cart

Bank Conditions:

DSK Bank

• Annual interest rate: 6.25%, but it is variable

• Minimum sum: 1 000 bgn

• Maximum sum: 80 000 bgn

• Minimum payment period: 18 months

• Maximum payment period: 10 years

https://dskbank.bg/%D0%B8%D0%BD%D0%B4%D0%B8%D0%B2%D0%B8%D0%B4%D1%83%D0%B0%D0%BB%D0%BD%D0%B8-%D0%BA%D0%BB%D0%B8%D0%B5%D0%BD%D1%82%D0%B8/%D0%BA%D1%80%D0%B5%D0%B4%D0%B8%D1%82%D0%B8%D1%80%D0%B0%D0%BD%D0%B5/%D0%BF%D0%BE%D1%82%D1%80%D0%B5%D0%B1%D0%B8%D1%82%D0%B5%D0%BB%D1%81%D0%BA%D0%B8-%D0%BA%D1%80%D0%B5%D0%B4%D0%B8%D1%82%D0%B8/%D0%B4%D0%B5%D1%82%D0%B0%D0%B9%D0%BB%D0%B8-%D0%B7%D0%B0-%D0%BF%D0%BE%D1%82%D1%80%D0%B5%D0%B1%D0%B8%D1%82%D0%B5%D0%BB%D1%81%D0%BA%D0%B8-%D0%BA%D1%80%D0%B5%D0%B4%D0%B8%D1%82%D0%B8/%D0%B8%D0%BD%D0%B4%D0%B8%D0%B2%D0%B8%D0%B4%D1%83%D0%B0%D0%BB%D0%BD%D0%B8-%D0%BF%D1%80%D0%BE%D0%B4%D1%83%D0%BA%D1%82%D0%B8/%D0%BF%D0%BE%D1%82%D1%80%D0%B5%D0%B1%D0%B8%D1%82%D0%B5%D0%BB%D1%81%D0%BA%D0%B8-%D0%BA%D1%80%D0%B5%D0%B4%D0%B8%D1%82

United Bulgarian Bank

• Annual interest rate: fixed at 6.9%

• Minimum sum: 1000 bgn

• Maximum sum: 120 000 bgn

• Minimum payment period: 6 months

• Maximum payment period: 5 years

https://www.ubb.bg/individual-clients/credits/potrebitelski-kredit-s-fiksirana-lihva?utm_

CC Bank

• Annual interest rate: fixed at 7.0%

• Minimum sum: 200 bgn

• Maximum sum: 30 000 bgn

• Minimum payment period: 1 year

• Maximum payment period: 7 years

https://www.ccbank.bg/bg/fizicheski-lica/potrebitelski-krediti/potrebitelski-kredit-nachalo

Which bank did I choose and why

DSK bank has the lowest initial interest rate starting at 6.25%. However, it is variable and it may change up or down. I am not the risky type of person, so I prefer my interest rate to be fixed. Therefore, DSK Bank isn’t suitable for me. Between the United Bulgarian Bank and CC Bank, the interest rate of the United Bulgarian Bank has a lower interest rate fixed at 6.9%. Therefore I will be using UBB. The payment period I chose is 3 years.

Calculations:

Monthly Interest Rate:

Repayment period in months:

Monthly Repayment Value:

Total Repayment Value and Total Interest:

Logical operations for first 5 months:

Interest for first month:

First month result:

Interest for second month:

Second month result:

Interest for third month:

Third month result:

Interest for fourth month:

Fourth month result:

Interest for fifth month:

Fifth month result:

Repayment schedule + Bonus

https://docs.google.com/spreadsheets/d/16lcy1HEZ5fGxCJ_bvENhVBU5TdFcVQhh5QZx8ds76ps/edit?usp=sharing

Conclusion

This project was one of the most relevant I have done. I have always thought that we should learn more about topics that we may need in real life. This project not only helped me understand compound interest better and how to use it effectively, but it also prepared me for real-life situations where I may need to take a loan. I also practiced using Google sheets, which reminded me the importance of staying organized by using, as in this case, schedules. This project has been really helpful and has definitely contributed to the development of my financial literacy, which is an essential skill for life.