Need help with interest workings

Jelli

Hi,

My concentration has been rather poor recently and would be very grateful if someone could help me work out if having interest paid monthly or yearly is better over a 5 year period. I don't think I need to mention the amount as the figure wont change the question will it?

Yearly 3.24% gross
Monthly 3.20% gross

It's the compound interest my brain is frozen on.

Thanks in advance.

Archi_Bald

You need to compare the AER.

There is generally zilch difference in AER between monthly and annual rates if the provider offers both on the same product. But AER is there to let you compare like with like.

Jelli

Archi_Bald wrote: »

You need to compare the AER.

There is generally zilch difference in AER between monthly and annual rates if the provider offers both on the same product. But AER is there to let you compare like with like.

The AER is 3.25% for both the monthly and yearly interest options but the gross is different as mentioned in my first post [3.20 and 3.25].

Sorry if the answer seems obvious.

p00hsticks

Jelli wrote: »

The AER is 3.25% for both the monthly and yearly interest options but the gross is different as mentioned in my first post [3.20 and 3.25].

If the AER is the same then the interest will be the same, providing you leave the monthly interest to compound.

The purpose of the AER (annual Equivalent Rate) is to allow you to compare monthly and annual rates without having to calculate the effect of compounding yourself.

Jelli

p00hsticks wrote: »

If the AER is the same then the interest will be the same, providing you leave the monthly interest to compound.

Many thanks.