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Can someone please explain monthly interest to me!
xela_17
Posts: 421 Forumite
I have a savings account with ING and they pay monthly. Last month I had roughly £730 in there and they paid me £1.30.
I was obviously wrong in calculating my interest by dividing the rate by 100 and then multiplying by the money there.
I know that 4.75 is the gross rate but even if I take the net rate as 3.75 (don't know the actual figure) my calculations are way out. (I calculated approx £26 interest).
Where am I going wrong?
I was obviously wrong in calculating my interest by dividing the rate by 100 and then multiplying by the money there.
I know that 4.75 is the gross rate but even if I take the net rate as 3.75 (don't know the actual figure) my calculations are way out. (I calculated approx £26 interest).
Where am I going wrong?
What did I do at work before I discovered MSE?!
DFD - WAS: a while ago
NOW - not sure, due to boyfriend going back to uni for masters and now pgce. Worth it in the long run!
Proud to be dealing with my debts!
DFD - WAS: a while ago
NOW - not sure, due to boyfriend going back to uni for masters and now pgce. Worth it in the long run!
Proud to be dealing with my debts!
0
Comments
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4.75% is the annual rate.
so £730 x 30/365 x 4.75/100 x 80/100 = £2.28 approx
.......30daymonth...grossrate....minus20%tax
hope this helps.Just for one moment, thought I'd found my way.0 -
Don't forget that from the 1st of Jan the interest rate drops to 4.5%
So you will get even less.
Yours
CalleyHope for everything and expect nothing!!!
Good enough is almost always good enough -Prof Barry Schwartz
If it scares you, it might be a good thing to try -Seth Godin0 -
You were just a factor of 12 out then.Happy chappy0
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Your calculation contains an error. You need to use the 'Gross p.a.' rate when calculating monthly interest for the ING Direct account.fairenoughclough wrote:4.75% is the annual rate.
so £730 x 30/365 x 4.75/100 x 80/100 = £2.28 approx
.......30daymonth...grossrate....minus20%tax
hope this helps.
The correct interest*, for a constant £730 balance throughout the month of November is...
730 x 4.65% / 365 x 30 x 0.8 = £2.23
* For a basic rate tax-payer
http://www.ingdirect.co.uk/html/aboutsavings/interestrates.html0 -
Why do you use 30/365 instead of 1/12?Happy chappy0
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tomstickland wrote:Why do you use 30/365 instead of 1/12?
Because interest is calculated daily and paid monthly, it varies depending on the number of days in the month.
YB, sorry I was working with the info given, will try harder next time.Just for one moment, thought I'd found my way.0 -
The average month will pay 1/12th of the yearly rate though, not 30/365ths. 12x30=360. Small difference I agree!Because interest is calculated daily and paid monthly, it varies depending on the number of days in the month.Happy chappy0 -
Has anybody got a spreadsheet for the technical phobic users out there. Can never get these calculations to work in excel?0
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Or better yet, anyone got a a simple set of formulas (like the ones we used to learn in Math) to put in one of the FAQ Stickys?Good, clean fun....MFW #11 2015 £7657 / £8880
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I'll make a web page explaining the common terms (as I understand them now) and see what people think.Happy chappy0
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