AER stands for Annual Equivalent Rate, which refers to the interest you would garner in your account provided you leave your principal an entire calendar year. AER standardisation is designed to facilitate comparisons amongst financial products and takes into account compound interest (interest generated from your initial deposit as well as previous interest earned).
Let's say you top up € 1000 in your Iban Account, which has an interest rate of 2.5% AER. In this case your account will earn € 25 in interest over one year, which is 2.5% of € 1000. (Assuming you didn't do any further deposits or withdrawals)
This is the formula that we use for all our products (except Iban Dynamic):
Final Balance at term = [Investment Amount] x (1 + AER) ^ [Term]
Note: The Annual Equivalent Rate does not take into account any tax that you may have to pay on interest earned on your deposit.
Look at the formula applied to the previous example:
1. Iban Account Balance at end of Year 1 = € 1000 x (1 + 2.5%) ^ 1 = € 1025
a. Interest Earned : € 25
Let's see another example:
You invest € 2000 in Iban Market, which has a term of 3 years and an interest rate of 4%:
Final Balance at term = € 2000 x (1 + 4%) ^( 3 ) = € 2249.7
You will receive € 249.7 in interest, after 3 years, if you invest 2000€ in Iban Market.