Interest rates

givememoney

Can anyone give me the formula to work out the following:

I have £3714.74 and interest for 1 month on that is £6.48.

How do I work out the interest rate I am being paid please

Herbalus

2.1%

6.48*12/3714.74*100

givememoney

Herbalus wrote: »

2.1%

6.48*12/3714.74*100

Thanks you are a genius

grumbler

The correct formula is (1+6.48/3714.74)^12-1 but for such low interest rate the results will be almost the same.

psychic_teabag

grumbler wrote: »

The correct formula is (1+6.48/3714.74)^12-1 but for such low interest rate the results will be almost the same.

Not sure about that... That formula is basically projecting forwards the interest that will be received if it is compounded monhtly for a year. So it's giving the AER, not the interest rate. I'd stick with the simpler formula for the actual interest rate.

brendon

psychic_teabag wrote: »

Not sure about that... That formula is basically projecting forwards the interest that will be received if it is compounded monhtly for a year. So it's giving the AER, not the interest rate. I'd stick with the simpler formula for the actual interest rate.

If the interest is compounded -- as you would expect it to be -- then the 'more complicated' formula is the correct one, since it gives you the actual rate if the money was kept for a year. I assume the OP wants the AER interest rate, not the monthly rate(?)

Sensory

Assuming it's interest without tax taken off, one is gross p.a. (2.09%) and the other is AER (2.11%), and both are usually quoted for financial products, so I don't see a problem.

Herbalus

I figured it didn't actually matter that much - the OP probably wants to know his rate so he can compare products, not do a maths exam. 0.02% either way isn't going to make any difference.

Hominu

Another way:

100 / 3714.74 * 6.48 = 1.744% (NET)
* 1.20 for BRT = 2.09% (GROSS)

grumbler

What's BRT? If you mean 20% tax, then you have to either divide by 0.8 or multiply by 1.25, not 1.2.

Sensory

Hominu wrote: »

Another way:

100 / 3714.74 * 6.48 = 1.744% (NET)
* 1.20 for BRT = 2.09% (GROSS)

Huh? 6.48 / 3714.74 * 100 = 0.17444% (one month's interest)