Tax, inflation, fees and effective annual rates when comparing investments

What this note covers

1. Why the advertised rate is not the return
2. Nominal and effective annual rates
3. Comparing accounts with different compounding frequencies
4. Flat interest and its equivalent annualised rate
5. Tax: interest as part of taxable income
6. Inflation: purchasing power and the real rate of return
7. Institution and government charges, and building the full comparison
8. How this is examined in the SACE Stage 2 paper

8 sections · 12 key terms & formulas · 6 common mistakes