20 percent KKM or 40 percent TL deposit? Which one yields more?

Ekonomim columnist Şeref Oğuz evaluated whether a 20 percent currency-protected deposit (KKM) interest rate or a 40 percent TL deposit interest rate is more logical.

Providing an example based on 100 thousand liras, Oğuz made the following assessment in his column today:

"The dollar exchange rate is 27.58 TL. According to the CBRT Market Participants Survey, the year-end expectation for the dollar exchange rate is 30 TL. In other words, an 8.7 percent increase in the exchange rate is projected. Someone with 100 thousand liras would earn 8,774 TL in 3 months solely due to the exchange rate difference.

There is no guarantee that the exchange rate will be at 30 TL. If the money is deposited into KKM at 20 percent for three months, the interest income will be 4,986.30 TL. Since the 8,774 TL exchange rate difference income is greater than the 4,986.30 TL interest income, the earnings of those who deposit money into KKM will be equal to the exchange rate gain. That is, the investor will have received 8,774 liras for 3 months.

When you deposit your 100 thousand TL into a 3-month (92-day) 40 percent interest account, it will be 109,578.08 TL at the end of the maturity period. That is a net gain of 9,578.08 TL. The amount the investor needs to decide on here is: 8,774 TL with KKM? Or 9,578 TL with a deposit? (Assuming the year-end expectation for the dollar exchange rate is 30 TL according to the Market Participants Survey). If the exchange rate rises to higher levels, KKM stands out as a much more attractive option."

News Source: 12punto