Main site > MoneySavingExpert.com Forums > MoneySavers Arms > The Money Savers Arms > Money Saving Polls - results & discussion > What's the APR of a ‘pint to say thanks for the c... (Page 1)

IMPORTANT! This is MoneySavingExpert's open forum - anyone can post

Please exercise caution & report any spam, illegal, offensive, racist, libellous post to forumteam@moneysavingexpert.com

  • Be nice to all MoneySavers
  • All the best tips go in the MoneySavingExpert weekly email

    Plus all the new guides, deals & loopholes

  • No spam/referral links
or Login with Facebook
What's the APR of a ‘pint to say thanks for the cash’? poll discussion
Closed Thread
Views: 15,284
Thread Tools Search this Thread Display Modes
# 1
MSE Lawrence
Old 10-03-2009, 3:07 PM
Researcher
Serious MoneySaving Fan
 
Join Date: Dec 2006
Posts: 971
Default What's the APR of a ‘pint to say thanks for the cash’? poll discussion

Poll between 10-16 March 09:

What's the APR of a ‘pint to say thanks for the cash’?

If someone lent you £20 and said "pay me back in a week, then buy me a pint (£2.75) and we’re sorted", what’s the equivalent APR?

Note: Thanks to Tony Levene’s guardian piece for inspiring this. To calculate the APR,a compound rate has been used.

You’ll find the answer by clicking the ‘Discuss Poll’ link AFTER you’ve voted.

A. 13.7% - 31% (3033 votes)
B. 82% - 6% (611 votes)
C. 275% - 12% (1176 votes)
D. 137% - 11% (1069 votes)
E. 2,750% - 17% (1665 votes)
F. 13,700% - 9% (922 votes)
G. 82,000% - 7% (671 votes)
H. 275,000% - 4% (371 votes)
I. 1.37 million % - 4% (406 votes)

Voting has now closed, but you can still click 'post reply' to discuss below. Thanks

PLEASE VOTE BEFORE YOU ANSWER.

TO FIND OUT THE ANSWER...

CLICK YOUR MOUSE TO HIGHLIGHT THE WHITE GAP JUST BELOW THIS AND IT WILL APPEAR.

Spoiler (highlight below to view):
Martin’s Answer and Explanation: The correct answer is G. Just over 82,000%. This is based on the fact that £2.75 on £20 is a 13.75% a WEEK interest rate. If that were to continue for all 365 days in the year including compound interest, the rate is just over 82,000%, meaning you’d owe over £16,000 (820x£20)

Now of course, the compounding of this is questionable. It assumes that because you must buy a pint if someone lends you £20, you would thus buy a pint and a half if someone lent you £30. Yet in reality it doesn’t work that way, it’d probably be just another pint. However if we focus on a pint as costing £2.75, and assume its a monetary value then the question works.

The aim of this question is to show the confusion around APRs and the real costs of borrowing. Many people often talk about 1,500% APRs being hideous, whereas actually if you’re borrowing over a day it may only be a few pence, something people would say is reasonable, whereas over 10 years it’d be crippling.


For more on this read the How interest rates work guide.

Last edited by MSE Lawrence; 16-03-2009 at 5:13 PM.
MSE Lawrence is offline
Report Post
The Following 4 Users Say Thank You to MSE Lawrence For This Useful Post: Show me >>
# 2
hermoine
Old 10-03-2009, 6:22 PM
MoneySaving Stalwart
 
Join Date: Nov 2007
Location: Pwllmeyric
Posts: 236
Default

So what is the right answer then?

Lol

H

hermoine is offline
Report Post
# 3
scottn
Old 10-03-2009, 6:42 PM
MoneySaving Convert
 
Join Date: May 2007
Posts: 165
Default

^^^


...
scottn is offline
Report Post
# 4
savvykaz
Old 10-03-2009, 7:02 PM
Serious MoneySaving Fan
 
Join Date: Jul 2006
Location: Leeds
Posts: 874
Default

To find the answer

Click in the white space, hold the click and drag the mouse down

(sorry I amended this so not to give the answer away too high up the thread - martin)
DMP starts June 2012, £38,180.

Balance June 2014 £29,577 (paid off 22%)

DMP mutual support thread no 434

Last edited by MSE Martin; 10-03-2009 at 8:47 PM.
savvykaz is offline
Report Post
The Following User Says Thank You to savvykaz For This Useful Post: Show me >>
# 5
McSaver
Old 11-03-2009, 12:43 AM
MoneySaving Stalwart
 
Join Date: Mar 2007
Posts: 595
Default

I got it correct - although I had the answer as 83,073 % based on a year being 365.25 days
Had £80,000 in Savings - All GONE!!! BYE BYE
Single, 27, Aspie, Gooner
McSaver is offline
Report Post
# 6
prismcat
Old 11-03-2009, 1:00 AM
MoneySaving Newbie
 
Join Date: Feb 2009
Posts: 3
Default

I've got it right, as well. It's 82,593% for 365 days.
It so many people vote for (A) 13.7% ... naive ...
prismcat is offline
Report Post
# 7
purplegaily
Old 11-03-2009, 8:11 AM
MoneySaving Convert
 
Join Date: Apr 2005
Posts: 48
Default

Wow, that's scary - I actually went too far and went for H.

I wasn't going to work out the math before 9am this morning, but recall APR's are nasty little beggars
Always on the look out for a bargain. Thanks if you've helped me bag one.
purplegaily is offline
Report Post
# 8
Thrifty09
Old 11-03-2009, 9:20 AM
MoneySaving Newbie
 
Join Date: Mar 2009
Posts: 2
Default

This reminds me of the great car tax ripoff.
The DVLA gives you the choice of paying for 12 months in one go, or 6 months now and 6 months later for 10% more. In other words you can pay 100% now, or 55% now and another 55% in 6 months' time. That works out at 49.3% APR!
Thrifty09 is offline
Report Post
# 9
Waldir
Old 11-03-2009, 12:06 PM
MoneySaving Convert
 
Join Date: Aug 2006
Location: Manchester
Posts: 130
Default

Quote:
Originally Posted by MSE Lawrence View Post
Now of course, the compounding of this is questionable. It assumes that because you must buy a pint if someone lends you £20, you would thus buy a pint and a half if someone lent you £30. Yet in reality it doesn’t work that way, it’d probably be just another pint. However if we focus on a pint as costing £2.75, and assume its a monetary value then the question works.


Yes, I think the compounding is more than questionable If you don't repay your friend after a week, I'm sure you'll just buy him a pint and extend the loan for another week (for another pint)
So at the end of the year you can get away for "only" 52 pints (715% APR)

Waldir is offline
Report Post
# 10
FairyElephant
Old 11-03-2009, 12:09 PM
Serious MoneySaving Fan
 
Join Date: Feb 2005
Location: Bristol
Posts: 1,107
Default

Quote:
Originally Posted by teddyco View Post
Thrifty09,

I would like to see the abolition of the car tax and only pay 'once' for the tax on a vehicle, when it is purchased new.
I think it would be more fair to abolish car tax and add it to the price of fuel! We are told car tax is to pay for repairs of the roads etc - so that way the people who used the roads more would be paying more for their upkeep!

Anyhow - back on topic - I knew the right answer but clicked vote before I put the dot in the right place, so it came out in the first option - Duh!

Still - this scenario would be cheaper than using many of the cash-machines which charge - some up to £5 per transaction and most around our way seem to be £3 - not that I ever use them though, I would have to be TOTALLY DESPERATE to do so.
Also, you get to see you mate again next week and have a social drink with them - having a good time with friends is priceless IMHO!
The best advice you can give your children: "Take responsibility for your own actions...and always Read the Small Print!"
..."Mind yer a*se on the step!"
TTC with FI - RIP my 2 MC Angels - 3rd full ICSI starts May/June 2009 - BFP!!! Please let it be 'third time lucky'..... EDD 7th March 2010.
FairyElephant is offline
Report Post
# 11
engelsepiet
Old 11-03-2009, 12:34 PM
MoneySaving Newbie
 
Join Date: Dec 2008
Posts: 10
Default

....having a good time with friends is priceless IMHO!

Hey, that could make a good credit card commercial! <deadpan>
engelsepiet is offline
Report Post
The Following 2 Users Say Thank You to engelsepiet For This Useful Post: Show me >>
# 12
PigDog
Old 11-03-2009, 2:22 PM
MoneySaving Newbie
 
Join Date: Dec 2007
Location: Bristol
Posts: 3
Default

Nah, you got it wrong. A IS the correct answer. The strict terms and conditions of this contract falls under the intention to create legal relations and specifically state the contract has a one week lifespan. Failure to pay before this deadline would fall outside these terms and conditions if a compound interest was to apply. At the end of the contract time limit there are no indications that another contract will be entered into.
The term APR (Annual percentage Rate) must be taken within the availible information that no other contract would be entered into in that given year.
So suck that !
Just because you are Paranoid doesn't mean they're not out to get you.
PigDog is offline
Report Post
The Following User Says Thank You to PigDog For This Useful Post: Show me >>
# 13
FairyElephant
Old 11-03-2009, 3:45 PM
Serious MoneySaving Fan
 
Join Date: Feb 2005
Location: Bristol
Posts: 1,107
Default

Quote:
Originally Posted by engelsepiet View Post
....having a good time with friends is priceless IMHO!

Hey, that could make a good credit card commercial! <deadpan>
...maybe I could market it to someone ?!? Oh Darn, someone beat me to it!

Hang on - I've got another one "it's not just food....it's bl**dy expensive food!" - sorry - did I get that one wrong??????????
The best advice you can give your children: "Take responsibility for your own actions...and always Read the Small Print!"
..."Mind yer a*se on the step!"
TTC with FI - RIP my 2 MC Angels - 3rd full ICSI starts May/June 2009 - BFP!!! Please let it be 'third time lucky'..... EDD 7th March 2010.
FairyElephant is offline
Report Post
# 14
~Brock~
Old 11-03-2009, 4:01 PM
Serious MoneySaving Fan
 
Join Date: Oct 2008
Posts: 1,514
Default

This reminds me of a post I made about the very same thing last year.

I must admit to be pleasantly surprised by Martin (i.e. the media) talking about interest rates in an sensible and non sensationalist manner for a change.
~Brock~ is offline
Report Post
# 15
toasted-lion
Old 11-03-2009, 8:02 PM
MoneySaving Convert
 
Join Date: Mar 2008
Posts: 27
Default

Once at school I lent someone 10p and he said he'd pay me 20p the next day. That's approx 75153362648762700000000000000000000000000000000000 00000000000000000000000000000000000000000000000000 000000000000
% APR!
toasted-lion is offline
Report Post
# 16
toasted-lion
Old 11-03-2009, 8:06 PM
MoneySaving Convert
 
Join Date: Mar 2008
Posts: 27
Default

Oh and PigDog, he said equivalent APR.
toasted-lion is offline
Report Post
The Following User Says Thank You to toasted-lion For This Useful Post: Show me >>
# 17
orange_groves99
Old 12-03-2009, 2:48 AM
MoneySaving Newbie
 
Join Date: Mar 2009
Posts: 2
Default

Surely the APR is just 0.1375*52 = 715%

The EAR is (1.1375)^52 - 1 = 81,084% (assuming weekly compounding, which is not specified in the question)
orange_groves99 is offline
Report Post
# 18
brightonman123
Old 12-03-2009, 2:45 PM
Fantastically Fervent MoneySaving Super Fan
 
Join Date: Feb 2008
Location: Brighton, actually
Posts: 7,657
Default

surely drinks go under goodwilll, so no APR due?!
What does the Scroll Lock button do, exactly..?
brightonman123 is offline
Report Post
# 19
daz9643
Old 12-03-2009, 3:19 PM
MoneySaving Convert
 
Join Date: Mar 2006
Posts: 66
Default A pint of beer

Of course the answer is 'none of the above'. See below,

If someone lent MARTIN £20 and said "pay me back in a week, then buy me a pint (£2.75) and we’re sorted", what’s the equivalent APR?

1. Martin would pay the money into an instant access account paying 4%.

2. He would then head down to J D Wetherspoons for a pint @ 99p.

3. He would then pay using a combination of cashback, 0% no fee credit cards while collecting loyalty points at the same time.

4. The interest he was earning would be used to pay off the £20 over the year and in 12 months time he would have made a tidy profit.
Stuff Martin Has Helped Me Save/Earn
£50 for joining First Direct.
£10 for opening an FHM casino account.
Free cup of Fairtrade Coffee from Starbucks.
Free Radflek radiator pack.
daz9643 is offline
Report Post
The Following 6 Users Say Thank You to daz9643 For This Useful Post: Show me >>
# 20
daz9643
Old 12-03-2009, 3:26 PM
MoneySaving Convert
 
Join Date: Mar 2006
Posts: 66
Default

Quote:
Originally Posted by Waldir View Post

Yes, I think the compounding is more than questionable If you don't repay your friend after a week, I'm sure you'll just buy him a pint and extend the loan for another week (for another pint)
So at the end of the year you can get away for "only" 52 pints (715% APR)
I wonder if I could suggest this to Littlewoods ? They are in Liverpool so they may go for it.
Stuff Martin Has Helped Me Save/Earn
£50 for joining First Direct.
£10 for opening an FHM casino account.
Free cup of Fairtrade Coffee from Starbucks.
Free Radflek radiator pack.
daz9643 is offline
Report Post
Closed Thread

Bookmarks
 
 




Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

 Forum Jump  

Contact Us - MoneySavingExpert.com - Archive - Privacy Statement - Top

Powered by vBulletin® Copyright ©2000 - 2014, Jelsoft Enterprises Ltd.

All times are GMT +1. The time now is 12:08 PM.

 Forum Jump  

Free MoneySaving Email

Top deals: Week of 27 August 2014

Get all this & more in MoneySavingExpert's weekly email full of guides, vouchers and Deals

GET THIS FREE WEEKLY EMAIL Full of deals, guides & it's spam free

Latest News & Blogs

Martin's Twitter Feed

profile

Cheap Travel Money

Find the best online rate for holiday cash with MSE's TravelMoneyMax.

Find the best online rate for your holiday cash with MoneySavingExpert's TravelMoneyMax.

TuneChecker Top Albums

  • ARIANA GRANDEMY EVERYTHING (DELUXE)
  • ED SHEERANX (DELUXE EDITION)
  • VARIOUS ARTISTSNOW THAT'S WHAT I CALL MUSIC! 88

MSE's Twitter Feed

profile
Always remember anyone can post on the MSE forums, so it can be very different from our opinion.
We use Skimlinks and other affiliated links in some of our boards, for some of our users.