Fixed term: which one should invest in and what interest does it give?

But what is a fixed term? What are the different options offered by Banco Provincia? what is the interest rate it generates? In this content of Program Include We offer you the answers to those questions.

In principle it must be said that a fixed term is a type of investment in which money is deposited in the bank for a certain period of time. At the end of that period, the person receives a remuneration in concept of interest ratelinked to the time your money remained deposited.

FIXED TERMS: TYPES AND CHARACTERISTICS

Traditional Fixed Term

It is a low-risk investment instrument, which can be carried out in a minimum term of 30 days and from an initial amount of 1,000 pesos. Currently, Banco Provincia offers a nominal annual rate (TNA) of 75%.

The operation can be carried out from the Provincial Internet Banking (BIP) following the route: Investments/Fixed Term/Incorporation.

Additionally, the Bank offers the option of Automatic renewal. In this way, at the expiration of the fixed term, it is reconstituted for one more period, investing the initial capital plus the interest generated. In this case, the maximum period for automatic renewal is 180 days.

Inverter type: the Annual Effective Rate (TEA) of a fixed term arises from reinvesting the initial capital plus the successive interest during a period of one year. In this way, the interest obtained at the end of the period is higher than that indicated by the Nominal Annual Rate (TNA).

Example: If one month a 30-day fixed term is made for $10,000, at a nominal annual rate of 75%, at the end of the period $10,616.43 will be obtained, made up of the initial principal of $10,000 plus $616.43 of interest. However, if that amount is reinvested in its entirety under the same term and rate conditions, the following month $11,270.86 will be obtained (10,616.43 principal + $654.43 interest). With the same rate and the same term, the interest obtained in the second month grew by $38, because the interest previously generated was reinvested.

Fixed term UVA

It is an investment that is used to somehow keep up with inflation. Submit a minimum term of 90 daysbut it offers the possibility of canceling it before expiration as long as at least 30 days have elapsed from the date the deposit was made.

In the case of UVA fixed terms, the amount in pesos invested by the saver is transformed into UVAs. The Purchasing Value Unit (UVA) is a measure of value that is set daily by the Central Bank. The same It follows the Reference Stabilization Coefficient (CER), based on the consumer price index published by the National Institute of Statistics and Censuses (INDEC) every month, which measures inflation.

The purpose of the UVA is to preserve the currency value of the contracts. So, if inflation in Argentina increases, so does this Purchasing Value Unit.

Banco Provincia offers the possibility of investing in a pre-cancellable UVA Fixed Term, with UVA yield + 1% (that is, the variation in the value of the UVA during the validity of the fixed term plus 1% TNA) at 90 days, which ensures a positive real yield against the increase in the prices of goods and services.

However, the holder of the pre-cancellable UVA Fixed Term has the possibility of canceling the operation, as long as 30 days have elapsed from the contractinggiving notice to the Bank five business days in advance, through the same contracting channel.

Then, You will not receive the variation of the UVA + 1% TNA as remuneration, but you will receive the pre-payment rate established by the Central Bank (which is reported in the certificate initially obtained).

So, which is better: a traditional fixed term or a UVA fixed term? The answer depends on when the investment is made. It happens that, unlike the traditional fixed term, in the UVA fixed term there is a degree of uncertainty because the rate is made up of a fixed part (1% interest) and another variable (the value of the UVA). For this reason, it is not possible to be certain of the amount of rent that will be obtained after 90 days. That is the big difference with the traditional fixed term, which anticipates the amount of interest that will be obtained at the end of the period.

In summary, Although the UVA fixed term protects the invested capital from inflation, in a situation of low inflation and high rates, its yield may be lower than that of the traditional fixed term.

Investor tip: stagger three UVA fixed terms in such a way that they expire on a monthly basis. Let us remember that the minimum period for this investment is 90 days, but if three staggered operations are carried out, a monthly income is obtained with the UVA fixed term rate conditions.

It should be noted that the Bank’s customers can make this type of investment through the Province Internet Banking (BIP) or in person at a branch. The minimum amount to invest is 1,000 pesos.

If you want to know more about the different investment options offered by Banco Provincia, you can contact our Investment Centerdependent on the Financial Services Management, through 0810-222-2776, option 2 > 7, Monday through Friday from 9 a.m. to 7 p.m.