Another boring interest calculation

steady__eddie

A 3 year bond is due to mature shortly and I have been sent a statement of its current balance. Having nothing better to do on a dull Sunday, I thought that I would check the maths. You’ve guessed it, either my maths or their computer has thrown a wobbly. Before I put my foot in my mouth, could anybody calculate the interest to date please given the following parameters?
Opening balance £1000 cash, date of opening 09/10/04 and interest is earned from and including the day immediately following receipt. Gross rate 5.6 %, A.E.R. 5.6 %, Net rate 4.8% I am a basic rate taxpayer. Interest was compounded each year on the 30th of June. Could someone work out a balance for me as at 30/06/07 ?
TIA.

noh

I make it about about £1136 assuming no penalties have been taken off for early encashment.

Nigel

mk-donald

Try this - days won't be precise as for instance if you paid by cheque you may find interest only kicks in from 'n' days later and I've just gone for 365 days and 8/10 not 9/10 end

Gross Rate - Date - Days - Add =Balance
5.60% 09/10/2004 £1,000.00 £1,000.00
5.60% 30/06/2005 264 £ 32.40 £1,032.40
5.60% 30/06/2006 365 £ 46.25 £1,078.65
5.60% 30/06/2007 365 £ 48.32 £1,126.98
..........08/10/2007 100 £ 13.83 £1,140.81

I think you have introduced an error as if the rate is 5.6%pa the net rate is NOT 4.8% as it is 20% tax deducted, ie 5.6% becomes 4.48% net

Am I close ?

YorkshireBoy

£1,128.24

Is there a prize for the nearest?

steady__eddie

"Is there a prize for the nearest? "

No but there is one for the highest

You are right mk-donald, net is 4.48, it was my fingers not working properly when I typed the post, (I really must put my glass down when I'm typing). Opened a/c. with cash
I worked it out as follows, if you can spot any deliberate mistakes can you voice your concerns please.
From 10/10/04 (day after deposit) to 30/06/05, 293 days
(293/365) * 4.48 *10 = £35-96
From 01/07/05 to 30/07/06, £1035-96 * 4.48/100 = £46-41
From 01/07/06 to 30/07/07, £1082-37 * 4.48/100 = £48-49
Balance as at 30/06/07 = £1130-96

They reckon that the balance as at 30/06/07 stood ay £1126-97, I appreciate that there's only £3-99 in it but that's a couple of NR shares round this way.
noh, it doesnt mature until 08/10/07 so penalties for early encashment don't arise. There will be another 100 days interest i.r.o. the period 01/07/07 to 08/10/07 to add on. I make that £12-27 (any advance on £12-27).

YorkshireBoy

steady__eddie wrote: »

if you can spot any deliberate mistakes can you voice your concerns please.
From 10/10/04 (day after deposit) to 30/06/05, 293 days

There's your error. It's actually 264 days.

The provider's figure is correct. The reason I was 'out' with my first answer was I didn't deduct tax until 30/6/07. :rolleyes: It should, of course, be deducted when the interest is paid each June.

...Date............No days.....Open bal.....Int gross.....Int net.....Close bal
10/10/2004
30/06/2005........264.........1,000.00.......40.50.......32.40.......1,032.40
30/06/2006........365.........1,032.40.......57.81.......46.25.......1,078.65
30/06/2007........365.........1,078.65.......60.40.......48.32.......1,126.97

mk-donald

Well I reckon I win the prize with a 1p error - and you never know whether they round those up/down, especially after 3 interest payments - and 2004 must have been a leap year so 366 may have come into it too.

Glad anyway that we've set your mind at rest - you wuzn't robbed!

YorkshireBoy

mk-donald wrote: »

2004 must have been a leap year so 366 may have come into it too.

It was, but played no part because the bond wasn't started until October of that year.

steady__eddie

Sorted, as all the best chavs say. YorkshireBoy wins the prize for his explanation. I sussed it last night 3 parts of the way through Lethal Weapon, my advice to anyone doing exercises of this nature is DO NOT trust a Council calendar. I could never remember that "30 days has November" thing so I used a monthly calendar. September must have become detached previously and the no brainer who had repaced it had put it after October. I had just turned the pages over fixing my gaze at the last date on each page and not giving the month a second thought.
Once again thank you folks, now what can you tell me about the meaning of life ? (Before anyone asks, not the Python version)