Premium Bonds Calculator Discussion Area

Crabman

FYI the Premium Bonds Calculator doesn't appear on the right hand "Tools Menu" at the moment...

http://i14.tinypic.com/4londl3.jpg

Northern_Rocked

This is my first post so firstly congratulations on a great money site !!

I'm considering a punt of the Premium Bonds while the dust settles post Northern Rock. The calculator has been very useful but why does it restrict the max amount to £30k when a household could have a bigger (joint) holding.

Ive pushed the numbers into a spreadsheet and projected using a "power" trendline but it would be nicer if I could just specify any amount.

BTW, using this method I estimate the chances of winning £1m with 60,000 bonds to be 1 in 25,000.

Aegis

P(£1M or more with 2 people) = 1 - P(less than £1M with 2 people)

= 1 - (1-P(£1Million for one person))^2

= 1 - (1 - 1/49692)^2

=4.025 x 10^-5

= 1 in 24846


Not a bad estimate by your method.

The_Bleurk

Once in about 2000 years....

Not to worry smaller prizes will keep you ticking along.

Another £50 win this month makes my stats for £30k: 37 months - 1.22 prizes a month - average winnings in a month £78.38 - equates to 3.14% pa (5.23% HRT equivalent). Theoretical win rate is 1.23 so thats looking good theoretical monthly winnings should be £93.54 to hit the Ernie overall interest rate - so thats about 84% efficient - I'm happy with that....

Got to be in it to win it whatever the calculator says!!!

Northern_Rocked

Thanks Aegis and The Bleurk for your feedback, and your right you've got to be in it to win it - but better odds than the lotto?

Aegis

Northern_Rocked wrote: »

Thanks Aegis and The Bleurk for your feedback, and your right you've got to be in it to win it - but better odds than the lotto?

Unfortunately not... I've done another calculation somewhere on the board that gives the relative probabilities of winning the Lotto jackpot using only the interest that you'd get on £30000 in a good savings account and the top Premium Bond prize with a holding of £30000. You stand a better chance of getting rich with the Lottery!

The_Bleurk

If you put £30000 in a high rate account that pays 6.5% then you will get £130 a month after basic rate tax. If you put all this on the lottery each month then your chance of hitting the big one is 1 in 107692!!! (each month).

Of course you may well win lesser prizes and the jackpots could well be more than a million (although you might have to share).

With 2x1 million prizes each month you have a 1 in 600000 chance with Ernie.

Northern_Rocked

The_Bleurk wrote: »

If you put £30000 in a high rate account that pays 6.5% then you will get £130 a month after basic rate tax. If you put all this on the lottery each month then your chance of hitting the big one is 1 in 107692!!! (each month).

Of course you may well win lesser prizes and the jackpots could well be more than a million (although you might have to share).

With 2x1 million prizes each month you have a 1 in 600000 chance with Ernie.

Thanks guys once again. I've taken the plunge despite your advice. I'm so spooked by the Northern Rock saga (I had to set my alarm to 04:00 to get my money out of an online account!!), I think its worth a 12 month punt !!

The_Bleurk

Nerd that I seem to be turning into.....

I have reviewed the last 21 lottery draws and discovered some interesting outcomes. Taking the £30k stake in a high paying interest account and using the interest to buy lottery tickets gives a 1 in 107000 chance of hitting the big time compared with 1 in 600000 every month with Ernie.

BUT!!!!

Looking at the probabilities of winning and the average winnings at each level on the lottery you'd be way better off with Ernie.

The equivalent interest rate on the lottery over a year would be 2.35% (3.91 HRT equivalent) IF and ONLY IF you were getting your 'fair' share of big wins.

You have just 1.85% chance of winning any prize each time but the odds of hitting 3 or 4 balls add up to almost that value (ie there is less than 2 thousandths of a percent chance you will hit 5 or more).

Typically therefore you are likely to see a return of only 1.2% pa (2.01% HRT equivalent).

This is with 'average luck' - it is interesting to note that unlike Ernie the prize values at each level vary considerably. For example in one of the weeks in the last 21 the jackpot was shared by 10 people reducing their win to £252k each - what a shock that would be!!! In practice over the last 21weeks the jackpot has been shared on average by 2 people.

Of course the opposite may be true - it could be you!!!

Anyway I know what I'm doing....

Ernie, me ole mate, me ole buddy, can I get you a drink...

:beer:

baby_boomer

Yant1 wrote: »

The results are "shocking" in my book mainly because its the biggest/most popular savings product

I don't believe it. Surely Cash ISAs and savings accounts beat Ernie hands down (in popularity and performance) ?

Northern_Rocked wrote: »

I'm considering a punt of the Premium Bonds while the dust settles post Northern Rock

Understandable, but I do hope you come to your senses in time. We are not going to see a string of banks or building societies go to the wall.