I am having a time with my paypal account, trying to figure out the interest. I don't know what kind of interest they pay, simple or compound or some other kind (and I don't know the difference). They pay it monthly. Using $5,000 as the balance, say they pay 5%, can someone give me a formula for figuring out how much I'll get?

Thanks for any help.

First of all if the principal or balance is 5% you have to know if that is the APR. APR means annual percentage rate. And percent means per hundred. Therefore at a rate of 5 per hundred, expressed as a decimal equals $5.00 per hundred dollars in one years time. So: $5,000.00 X .05 = $250.00 interest earned after one year's time. That is simple interest.

If the interest is "compound" you need to know whether it is compounded monthly or continuously. Taking the above example and rate the first month's share of interest would be $250.00 divided by 12, because there is only one month that they have held your $5,000.00 . So at the end of the second month your principal, having increased by $250/12 would now be $2500 + $250/12 or $2520.33. A rule of thumb is that compound interest will double your money at a rate of 72, any combination of numbers that total 72, for example at 6 percent it takes twelve years, at twelve percent 6 years, at, 3 percent it takes 24 years, etc. So it takes roughly 72/5 years to double your money at 5 percent compound interest. But I wouldn't expect that PayPal pays anything like 5 percent interest. At 5% it would take 14.4 years to double your money, whereas simple interest would total $3600 + $5000= $8600