Interest Calculation

buffman

Thanks everyone. Quite simply, I received a calculation from a bank with only the details supplied above and I wanted to check that their calculation (showing the amount of interest paid each quarter ) was correct. I was surprised that I could not find anywhere on the web to simply plug in the numbers.

le_loup

buffman wrote: »

I was surprised that I could not find anywhere on the web to simply plug in the numbers.

Ever heard of calculators?
......... or even 1000 * 3% /4 a piece of paper and pencil?
......... or ever a head?

polymaff

buffman wrote: »

Thanks everyone. Quite simply, I received a calculation from a bank with only the details supplied above and I wanted to check that their calculation (showing the amount of interest paid each quarter ) was correct. I was surprised that I could not find anywhere on the web to simply plug in the numbers.

Buffman - there must be more than that. Please identify the savings product and the date when you opened it.

buffman

Opened Novemebr 2010, matures November 2015. Gross Rate/AER = 5.01% paid quarterly net of basic rate tax. I am trying to figure out what the maturing balance will be for an investment of £1000. ( I know the figures are different from those originally posted but I wanted to simplify it). The formular that I used in the opening thread does not give the same amount as the bank statement shows.

polymaff

buffman wrote: »

Opened Novemebr 2010, matures November 2015. Gross Rate/AER = 5.01% paid quarterly net of basic rate tax. I am trying to figure out what the maturing balance will be for an investment of £1000. ( I know the figures are different from those originally posted but I wanted to simplify it). The formular that I used in the opening thread does not give the same amount as the bank statement shows.

The product name - buffman!

bsms1147

1000*(1+(0.8*0.0501))^5) = £1217.12 (net)

If the maximum balance of the account is reached at any time you cannot benefit from compounding, so it would be less than this.

?

YorkshireBoy

polymaff wrote: »

The product name - buffman!

No, let's keep guessing. I'm going for £1,282.67


Disclaimer: I've made a lot of assumptions (but I'm not saying what they are!).

polymaff

bsms1147 wrote: »

1000*(1+(0.8*0.0501))^5) = £1217.12 (net)

The right formula IF the account is a 5.1% AER, 5.01% gross 5-year bond paying out quarterly nett interest.

Buffman - you've got to post verifiable information, not just your misinterpretation of the facts.

bsms1147

YorkshireBoy wrote: »

No, let's keep guessing. I'm going for £1,282.67


Disclaimer: I've made a lot of assumptions (but I'm not saying what they are!).

You sly boots.

Eco_Miser

le_loup wrote: »

Ever heard of calculators?

They need a formula to work out.

le_loup wrote: »

......... or even 1000 * 3% /4 a piece of paper and pencil?
......... or ever a head?

and that's not the formula.

You need the fourth root of 1.03 to get the quarterly interest rate, subtract 1, multiply by .8 to deduct tax at 20%, add 1 again, and raise to the 8th power (for 2 years in quarters), then multiply by the principal (1000) for the final balance.
Which is what PeacefulWaters did.

If there's no tax, then the OP's original calculation is correct.

For 5 years at 5.01 gross paid net of 20% tax quarterly, the total would be £1220.67
1000*(1+(0.8*0.0501/4))^20) since the compounding is quarterly.