Interesting - Nationwide Flex Regular Saver 8% AER

[Deleted User]

Rich1976 said:

[Deleted User] said:

Rich1976 said:

AmityNeon said:

Rich1976 said:

Not sure how many times people need to explain how regular savers work on these threads 🙄 and still it doesn’t sink in.

It's not that. Check the OP's extensive (trolling) history.

Ah ok, that’s even worse then a genuine lack of understanding!

Provide the math behind your rhetoric or are you math illiterate?

I understand how regular savers work thanks.

and it is maths not math. Didn’t realise I was on an American forum

But do you? The anecdotal use of the number 78 mentioned on the forum as a rule of thumb does not appear to compound the interest but does deliver the return as advertised. Another issue is that the AER formula =((1+(0.076969/365))^365)-1 compounds over the number of periods to deliver the actual interest rate but as no compounding of interest in the stated premium appears to take place is it a true representation of the interest rate in play?

Bazzalona13295

Wow. Talk about look after the pennies.

happybagger

[Deleted User] said:

Rich1976 said:

[Deleted User] said:

Rich1976 said:

AmityNeon said:

Rich1976 said:

Not sure how many times people need to explain how regular savers work on these threads 🙄 and still it doesn’t sink in.

It's not that. Check the OP's extensive (trolling) history.

Ah ok, that’s even worse then a genuine lack of understanding!

Provide the math behind your rhetoric or are you math illiterate?

I understand how regular savers work thanks.

and it is maths not math. Didn’t realise I was on an American forum

But do you? The anecdotal use of the number 78 mentioned on the forum as a rule of thumb does not appear to compound the interest but does deliver the return as advertised. Another issue is that the AER formula =((1+(0.076969/365))^365)-1 compounds over the number of periods to deliver the actual interest rate but as no compounding of interest in the stated premium appears to take place is it a true representation of the interest rate in play?

Having made this post I'm convinced the thread was a wind-up and that you clearly have the intelligence to know already how interest on RS accounts actually works.

Londonlisa12

100% it would take a very stupid person to think it’s anything but a troll.The exact same thing crops up here every few months.

wiseonesomeofthetime

I called it pages ago 🤦‍♂️🤷‍♂️

crumpet_man

Misleading thread title, none of this has been interesting.

ColdIron

It wasn't intended to be

[Deleted User]

Exodi said:

[Deleted User] said:

BoGoF said:

[Deleted User] said:

BoGoF said:

What do you think it should be?

Give Nationwide a call

No need when the website says (estimate) £104.

Yes it does   However if websites Occam Investing, Nutmeg and the Calculator site are anything to go by the interest should be £323.19.

AI Captain...

With respect, please just stop and read some of the comments above.

If you entered it properly on the calculator site, you would get the same as Nationwide:

The modified compound formula is : Interest = P * [(1 + r/n)^(n*month/12) - 1]. The website now produces a different answer to that which you experienced. I take on board that banks will subtract admin charges from the amount of interest payable.

In Excel:

1.     In cell A1, enter the monthly deposit amount, which is 200.

2.     In cell A2, enter the annual interest rate, which is 0.08.

3.     In cell A3, enter the number of times the interest is compounded per year, which is 365.

Then, for each month from 1 to 12, do the following:

1.     In cell B1, enter the month number, starting with 1.

2.     In cell C1, enter the following formula to calculate the interest for that month:

=A$1*(POWER(1+A$2/A$3, A$3*B1/12)-1)

Drag this formula down from C1 to C12 to calculate the interest for each month.

Finally, in cell C13, enter the following formula to calculate the total interest earned after one year:

=SUM(C1:C12)

This will give you the total interest earned after one year.

 

Exodi

happybagger said:

Having made this post I'm convinced the thread was a wind-up and that you clearly have the intelligence to know already how interest on RS accounts actually works.

You are giving them too much credit.

[Deleted User] said:

Exodi said:

[Deleted User] said:

BoGoF said:

[Deleted User] said:

BoGoF said:

What do you think it should be?

Give Nationwide a call

No need when the website says (estimate) £104.

Yes it does   However if websites Occam Investing, Nutmeg and the Calculator site are anything to go by the interest should be £323.19.

AI Captain...

With respect, please just stop and read some of the comments above.

If you entered it properly on the calculator site, you would get the same as Nationwide:

The modified compound formula is : Interest = P * [(1 + r/n)^(n*month/12) - 1]. The website now produces a different answer to that which you experienced. I take on board that banks will subtract admin charges from the amount of interest payable.

In Excel:

1.     In cell A1, enter the monthly deposit amount, which is 200.

2.     In cell A2, enter the annual interest rate, which is 0.08.

3.     In cell A3, enter the number of times the interest is compounded per year, which is 365.

Then, for each month from 1 to 12, do the following:

1.     In cell B1, enter the month number, starting with 1.

2.     In cell C1, enter the following formula to calculate the interest for that month:

=A$1*(POWER(1+A$2/A$3, A$3*B1/12)-1)

Drag this formula down from C1 to C12 to calculate the interest for each month.

Finally, in cell C13, enter the following formula to calculate the total interest earned after one year:

=SUM(C1:C12)

This will give you the total interest earned after one year.

As usual you're wrong as you're taking an AER and adding compound interest to it.

Also, on top of making the number 1 rookie error (assuming that a regular saver will pay a years worth of interest on the final balance), you've now made the number 2 rookie error in misinterpreting Nationwide calculating interest daily as compounding interest daily.

If you have a penchant for Excel, a more accurate way to calculate it would be:

1. In cell A1:A12, enter the month number. E.g. A1 = 1, A2 = A1+1, and drag it down to A12
2. In cell B1:B12, enter the balance. E.g. B1 = £200, B2 = B1+200, and drag it down to B12
3. In cell C1, enter the months interest. E.g. =FV(0.08/12,1,-B1,0,1)-B1 and drag it down to C12
4. In cell C13, enter =SUM(C1:C12) 

Example below. You could do the same thing with daily intervals if you're a glutton for punishment, it yields the same result. Nationwide calculating interest daily is a bit of a red herring as it is done for products with regularly fluctuating balances in mind (e.g. current accounts, easy access accounts, etc).

The FV function is not compounding the interest in this example because it is only calculating the interest for each individual period. Someone smarter than me could probably write a single FV function in cell C13 without needing to do the sums above it. If you're now intent on pretending you already knew this, I'd love it if you could work out this formula for me (that isn't excessively long and just the formula in cell C1 + formula in cell C2, etc).

[Deleted User]

Nationwide’s product page states that interest is calculated daily and compounding must be in use because AER = (1 + (r/n))^n – 1 is a compound equation.

The FV function uses the nominal rate, you have used the effective rate or AER so your use of the FV function appears to be inappropriate.

In my previous reply do the following:

2.     In cell C1, enter the following formula to calculate the interest for that month:

=A$1*(POWER(1+Nominal(A$2, A$3)/A$3, A$3*B1/12)-1)

Observe use of Excel Function Nominal to obtain the nominal rate r.

In the online calculator the rate field is nominal not effective, one should not enter an AER value. Entering 7.81% will give the £104 required, note however that the AER value will inflate to 8.1%. To calculate AER in Excel, use the Effect function.