Interest Received - could someone please double check?

[Deleted User]

Hi,

I've just reread the first post, OP is not asking for annual interest, but interest up to 7/10/12, 11 months and 5 days, so Santander about right.

[Deleted User]

Hi,

mania112 wrote: »

My minds gone completely blank, but why isn't the 5% AER Gross

£593.31? (£11,866.24 + 5%)

because £11,866.24 is the final balance, it wasn't in for full year, the start amount was £9166.24.

Consumerist

mania112 wrote: »

My minds gone completely blank, but why isn't the 5% AER Gross

£593.31? (£11,866.24 + 5%)

Because further deposits were made which also earn interest. The period covered was not a full year either.

mania112

ah yes, so it's the long calculation (unless one can remember the formula!) whereby you :

Month 1 = £x + 5% + deposit
Month 2 = £x2 + 5% + deposit
etc

got it. This plan says 'interest is calculated daily', so maybe that's something to do with it (again, I can't remember the calculation).

You'd be amazed to learn I recently passed the IFA's exam for this kind of thing (R02)!

rb10

Consumerist wrote: »

The period covered was not a full year either.

Yes it was!

Interest last paid 7/10/11, taking the balance to 8866.24.

Then further transactions during the year, and interest paid again on 7/10/12.

Consumerist

rb10 wrote: »

It's 5% gross paid annually on this account (so also 5% AER).

Should have spotted that the balances you give did not include interest payments. My fault.

Consumerist

rb10 wrote: »

Yes it was! Interest last paid 7/10/11, taking the balance to 8866.24. Then further transactions during the year, and interest paid again on 7/10/12.

Quite right. Think I'm having a bad day.

[Deleted User]

Hi,

mania112 wrote: »

ah yes, so it's the long calculation (unless one can remember the formula!) whereby you :

Month 1 = £x + 5% + deposit
Month 2 = £x2 + 5% + deposit
etc

got it. This plan says 'interest is calculated daily', so maybe that's something to do with it (again, I can't remember the calculation).

You'd be amazed to learn I recently passed the IFA's exam for this kind of thing (R02)!

well I would say the long calculation was,

Month 1 =£x+5% =Y

Month 2 =(Y + 300) +5% =Z

Month 3 =(Z + 300) + 5% =?

rb10

[Deleted User] wrote:

Hi,



well I would say the long calculation was,

Month 1 =£x+5% =Y

Month 2 =(Y + 300) +5% =Z

Month 3 =(Z + 300) + 5% =?

That would be correct if interest was compounded (paid) monthly ... here, all the interest is paid at the end of the year (7th October each year).

The way that I calculate this is:

Month 1 interest = [Month 1 balance] * 5% / 365 * [number of days in month 1]
Month 2 interest = [Month 2 balance] * 5% / 365 * [number of days in month 2]
Month 3 interest = ... as above

And then add up all the interest amounts.

mania112

I think the issue is with the deposit(s) in the month of October.

2nd October 2011 - you paid something
7th October 2011 - Interested was added and balance was £8,866.24
2nd October 2012 - you paid £300
7th October 2012 - Interested was added including only 5 days interest in October 2012 and the remaining days of the month (if you like) accrued last year, when the balance was lower.