tell the diff.

[Shrutibhatnagar]

hello,

their are two programs 

1) 

data earnings;
amount=1000;
rate=0.0375;
do month =1 to 12;
ci=(amount+earned)*rate;
earned+ci;
output;
end;
run;

this calculates compound interest 

and second one :

2)

data earnings;
do year=1 to 20;
capital+2000;
do month =1 to 12;
interest=capital*(0.075/12);
capital+interest;
output;
end;end;
run;

which is also calculating the interest but i dont know what is happening in the second .why do they divide by 12 ? 

[Kurt_Bremser · Accepted solution]

The first one calculates 3.75 percent per month, the second one 7.5 percent per year, split over 12 months.

[Shrutibhatnagar]

what is the purpose of calculating interest this way when . Is it practically used ?