Wrong calculation of interset?

YorkshireBoy

I seem to remember there's some guidance notes/code of practice on the BBA website regarding the calculation of interest in leap years.

Might be an idea to check there first before spending too much time and effort on such a small discrepancy?

ChuckCash

Whether or not the bank has acted within it's t&c's, I can sympathise with your feeling of being short changed.

If the bank advertises 7.01% Gross, that's what you would expect to receive.

I calculate that the interest they paid you equates to approx 7.00196667% Gross, which just does not seem fair, whatever their justification.

YorkshireBoy

YorkshireBoy wrote: »

I seem to remember there's some guidance notes/code of practice on the BBA website regarding the calculation of interest in leap years.

Here's one link (there are several others) returned from a search for "interest calculation")...

http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=135&a=261&artpage=all

Section 8 seems to say they can choose whether to use 365 or 366 days in a leap year.

ChuckCash

Section 8 also says:

"No rate or return shall be given greater prominence than the AER."

and:

"Where an interest rate is calculated on a basis other than actual/365, the basis should be stated and the AER should nonetheless be calculated on an actual/365 basis."

So does that mean the AER is 7.01 but the actual rate is less than AER?

sloughflint

derrick wrote: »

If I started the bond 1st February 2008 until 31st January 2009, I would still have expected to receive £10515 gross, or should I have expected more as they had my money for an extra day?

You would have had more:
(335/366+31/365) >1

Gwhiz

All this for £12.05 (and you may be in the wrong anyway!!!). Get a life! :rolleyes:

Lokolo

sloughflint wrote: »

You would have had more:
(335/366+31/365) >1

Or in simple terms:

11 months at 366 and 1 month at 365 is more than 12 months at 366.

YorkshireBoy

ChuckCash wrote: »

"Where an interest rate is calculated on a basis other than actual/365, the basis should be stated and the AER should nonetheless be calculated on an actual/365 basis."

So they can't advertise "7.01% Gross/AER" in a leap year if they're using 366 days then?

How was the offer originally described Derrick?

sloughflint

Lokolo wrote: »

Or in simple terms:

11 months at 366 and 1 month at 365 is more than 12 months at 366.

Simple terms?
Interest is calculated daily. I gave the multiplier to get the exact interest. Is that not simple enough then?
Clearly less than 1 gives less than Op's anticipated interest and greater than 1 gives more then anticipated.

YorkshireBoy

Lokolo wrote: »

The rate is calculated by the AER and that it has been.

I don't think that's correct Lokolo. You always earn interest at the quoted 'gross p.a.' rate. The AER itself is derived from the gross p.a. rate paid along with compounding/compounding frequencies.