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help with calculatation please

Please someone calculate this for me.

I have £6000 but not sure whether to put in the bank that provides,

a) 6.00% Gross / AER invest (between £20-£500 per month) over a 12 month period

or

b) 2 year fixed rate bond at 5% gross



How much interest will i get at the end of 1yr and 2yr?

Thanks in advance

Comments

  • sloughflint
    sloughflint Posts: 2,345 Forumite
    No contest. Fixed bond.In view of interest rates dropping drastically for the feed account and loss in transit while sending the funds.

    When is the interest on the bond paid? On maturity or annually?

    For calculation:

    If you were feeding the 6% with a maximum £500 per month from say a 3% paying instant access account, the overall rate would be (6.5*0.06+5.5*0.03)/12=0.04625 ie 4.625% gross for one year and then you'd be looking to place funds somewhere else for year 2.

    For the bond:
    After year 1: 6000*0.05*0.8=£240 net
    year 2: 6240*0.05*0.8= £249.60 net

    if gpa is 5% and interest paid annually.
  • mrseyes
    mrseyes Posts: 302 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    No contest. Fixed bond.In view of interest rates dropping drastically for the feed account and loss in transit while sending the funds.

    When is the interest on the bond paid? On maturity or annually?

    For calculation:

    If you were feeding the 6% with a maximum £500 per month from say a 3% paying instant access account, the overall rate would be (6.5*0.06+5.5*0.03)/12=0.04625 ie 4.625% gross for one year and then you'd be looking to place funds somewhere else for year 2.

    For the bond:
    After year 1: 6000*0.05*0.8=£240 net
    year 2: 6240*0.05*0.8= £249.60 net

    if gpa is 5% and interest paid annually.


    a) Interest is paid after 12 months, providing you don't miss a payment or make a monthly payment of under £20 or in excess of £500, or make a withdrawal following account opening.


    b) With bond Interest automatically repaid at the end of year one
  • sloughflint
    sloughflint Posts: 2,345 Forumite
    I take it my post did not make sense to you in view of your reply.:confused:

    Don't be taken in by the 6%. You won't get 6% on the full £6000
    See this:
    http://spreadsheets.google.com/pub?key=pLv5pWbQddSKWBLDYhhLQWA

    and this discussion:

    http://forums.moneysavingexpert.com/showthread.html?p=17267977

    Interest for the 5% bond as in previous post.
  • tuggy12
    tuggy12 Posts: 1,314 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    I take it my post did not make sense to you in view of your reply.:confused:

    Don't be taken in by the 6%. You won't get 6% on the full £6000
    See this:
    http://spreadsheets.google.com/pub?key=pLv5pWbQddSKWBLDYhhLQWA

    and this discussion:

    http://forums.moneysavingexpert.com/showthread.html?p=17267977

    Interest for the 5% bond as in previous post.


    Actually, the Google spreadsheet is incorrect as it assumes that the monthly interest rate is the annual rate/12
  • sloughflint
    sloughflint Posts: 2,345 Forumite
    tuggy12 wrote: »
    Actually, the Google spreadsheet is incorrect as it assumes that the monthly interest rate is the annual rate/12
    Indeed, the spreadsheet was an approximation to explain the drip feed method in the other thread as was the calculation used in post 2 relating to the RS.
    The values will be close enough for Op's purpose to decide between a bond or a RS.

    Unnecessary for this situation I think but for a daily interest spreadsheet calculation for a RS :

    http://spreadsheets.google.com/pub?key=pLv5pWbQddSKQ6lhHTNq8SA
  • sloughflint
    sloughflint Posts: 2,345 Forumite
    Mrseyes, have you made a decision then? I notice you posted about the principality RS yesterday afternoon.

    It would certainly be a good home for new money but not your £ 6000 ( unless you happened to have a feed account guaranteed to pay well above 3.85% and even then you'd have to rehome the 6k at the end of 12 months at possibly lower rates than 5%)

    Do you see where I am coming from?
  • mrseyes
    mrseyes Posts: 302 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    Mrseyes, have you made a decision then? I notice you posted about the principality RS yesterday afternoon.

    It would certainly be a good home for new money but not your £ 6000 ( unless you happened to have a feed account guaranteed to pay well above 3.85% and even then you'd have to rehome the 6k at the end of 12 months at possibly lower rates than 5%)

    Do you see where I am coming from?

    Thankyou. I know where you are coming from. Yeasterday i was exploring/researching etc, also went to see FA at the local abey who offered me one of their account where he suggested that i could put £3000 (fixed 5.5% interest for 1yr), equal amount in their product for 3-5 yrs (i could use £3000 isa allowance for this yr in stocks and share).

    I am more confused where to put my money now.
  • Wookey
    Wookey Posts: 812 Forumite
    If you can find a fixed rate isa bond paying higher than 4% you would be slightly better of, nationwides is currently 4% so there is bound to be better out there.
    Norn Iron Club member No 353
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