Computing the yield

1. You can compute the yield accurately by using a financial calculator.

Example:
Period: 5 years
Amount now: $5,000
Annual saving: $1,200 for 5 years
Accumlated amount in 5 years now: $12,000
Annual saving invested at beginning of year
Computed yield: 2.23% p.a.

Annual saving invested at end of year
Computed yield: 2.58% p.a.

2. If you do not have a financial calculator, you can use a rough method.

Total invested at start of period: $5,000
Total invested at end of period: $11,000
Average amount invested: ($5.000 + $11.000) / 2 = $8,000
Gain for period: $12,000 - $11,000 = $1,000
Yield = $1,000/ $8,000 / 5 years = 2.5% per year

This method works for short durations, i.e. up to 5 years. The difference
betweens larger for longer duration.

Tan Kin Lian