LTSB VANTAGE - question

oldfella

wrong period - i'm talking about jan-feb not dec-jan.

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sorry I thought I was clear ..
the period starts on 4th Jan and ends on 31st Jan
28 days at 3.93% less tax = £16.88

masonic

YorkshireBoy wrote: »

I believe my Yorkshire Bank Savings Plus account pays interest quarterly...at least it used to do.

In fairness, I think I might have had a quarterly paying account as a nipper, but I'd assumed the practice had long since died out.

Loughton_Monkey

My understanding is that banks generally apply interest at the 'daily rate'.

Hence to convert an annual rate (say 4%) you need to do the calculation of (1+0.04)^(1/365) = 1.000107...... And then for any month, the interest will be [Opening Balance]*(1.000107...)^(30). Or 31 or 28 - depending upon days in the month. [You probably get the idea. You need to deduct/add the '1' where appropriate]

This always gives slightly different answers than the ^(1/12) alternative which I don't think is used much. You will find on any account with a 'stable' balance, the interest differs depending upon the number of days in the month.

masonic

Loughton_Monkey wrote: »

My understanding is that banks generally apply interest at the 'daily rate'.

Hence to convert an annual rate (say 4%) you need to do the calculation of (1+0.04)^(1/365) = 1.000107...... And then for any month, the interest will be [Opening Balance]*(1.000107...)^(30). Or 31 or 28 - depending upon days in the month. [You probably get the idea. You need to deduct/add the '1' where appropriate]

This always gives slightly different answers than the ^(1/12) alternative which I don't think is used much. You will find on any account with a 'stable' balance, the interest differs depending upon the number of days in the month.

This would only work when interest was compounded on a daily basis. Few, if any, accounts compound interest on a daily basis. It would lead to a situation where you would be earning compound interest on interest that had not yet been paid. The ^(1/12) conversion from AER to gross gives an accurate answer when interest is paid and compounded monthly.

I think the reason you are getting confused here is because when you calculate the gross rate using the formula above, you then need to multiply it by (days/365), where days is the number of days in the month. This is what the OP was correctly trying to do, but he was using the AER rather than the gross rate.

Edit: To clarify... Daily rate = gross rate / 365, but it doesn't equal (1+AER)^(1/365)-1

YorkshireBoy

masonic wrote: »

Few, if any, accounts compound interest on a daily basis.

Egg Savings accounts are the only ones I'm aware of...

http://new.egg.com/visitor/0,2388,3_11097--View_165-bID_ESAIntRateFAQ-dva_1,00.html#howismyinterestcalculated?