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Interest Received - could someone please double check?

2

Comments

  • 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]
    [Deleted User] Posts: 0 Newbie
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    edited 15 November 2012 at 10:54PM
    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.
  • 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.
    >:)Warning: In the kingdom of the blind, the one-eyed man is king.
  • mania112
    mania112 Posts: 1,981 Forumite
    Part of the Furniture Combo Breaker
    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
    rb10 Posts: 6,334 Forumite
    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.
  • 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.
    >:)Warning: In the kingdom of the blind, the one-eyed man is king.
  • 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. :o
    >:)Warning: In the kingdom of the blind, the one-eyed man is king.
  • 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
    rb10 Posts: 6,334 Forumite
    edited 8 August 2024 at 1:41PM
    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
    mania112 Posts: 1,981 Forumite
    Part of the Furniture Combo Breaker
    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.
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