Interest rate confusion

PinkJellyBean

Hi all I'm just looking for some advice on interest rates I was never given any financial education at school so I've been trying to educate myself financially recently.
I'm looking at saving some money over the next two years to buy a decent second-hand car and I was using an online banks interest rate calculator to figure out what interest rates I need to be looking for in a product and I can't seem to figure out this anomaly I was wondering if somebody could explain this to me?
Total amount to save: £5000
Period to save: 2 years
If I input that I can only save £100 per month it calculates I need an interest rate of 89.66% :eek:
BUT
If I input I can save double that at £200 a month I would have assumed the interest rate is half so maybe 44.99%?
But its not its 3.97% :huh::huh:

How does this workout?

ChesterDog

If you saved £200 per month for two years then you would have £4,800. Thus you need only a small amount of interest on top of that to meet your £5,000 target.

If you saved only £100 per month for two years then you would have only £2,400. That is less than half way to your target, so you would need a very high interest rate to make up the difference.

ChesterDog

The way you are looking at it, you might think that if you saved £1,000 per month for two years, then you would need an 8.966% interest rate to meet your target. :-)

In fact, of course, you would meet your target even without interest after five months.