How to calculate interest

dickdaby1962

I have a Fixed Term 1 Year ISA valued at £10,932.52 with an interest rate of 5.9% AER

I received £47.43 in interest for March

I was told that the daliy interest rate is 1.63% and that it was calculated for February (29 days) but the bank could not help me any further

Can anybody provide an insight into the calculation of £47.43?

Kind Regards

RobfromCornwall

My dodgy maths gives me this:

5.9/365 = 0.000161644 daily rate

0.000161644 x £10932.52 = £1.77 per day

£1.77 x 30 = £53.02 per month

£1.77 x 365 = £365.02 per year

Roughly.  

slinger2

If it was paid monthly you'd expect .479% for a month (1.059^(1/12)-1=0.00479) ie £52.37. If it was paid daily in February you'd expect .455% for February (1.059^(29/366)-1=1.00455) ie £49.74. So doesn't quite pan out on the numbers you've given.

LeafGreen

On what date did the 1 year fixed term commence and what was the starting balance on that date?

5.9% AER means "Annual Equivalent Rate"
I expect the actual (gross) interest rate will be slightly lower (5.75%ish)
But being paid monthly, as the months go by, you will be getting interest on all the previous months interest (known as compounding) so the interest payments should increase slightly every month throughout the term.
Then at the end of the term if you add up all the 12 monthly interest payments you should get a total which is 5.9% of the original amount.

surreysaver

10,932.52 x 0.059 ÷ 365 = 1.76717446575
1.76717446575 x 29 = £51.25
If you provide the gross rate rather than the AER, we can give a more accurate figure. 5.9% divided by 365 days is not 1.63%.  I suspect that should be £1.63 per day.
£1.63 x 29 days = £47.27

AER is just for comparing different products. To do a calculation like this you need to use the gross rate

Tagarete

Hello
Not sure if I'm posting my question in the right place, if not please redirect me.
I would be very grateful if someone who understands interest rates and can do maths could tell me, if I open an a savings account with 3.25% AER/gross a year and deposit £30000 for just 2 weeks, what interest might that gain me? I realise that interest won't actually be paid out until the end of a 12 month period. I'm just wondering if it's actually worth doing it for such a short time, the money will be going into my mortgage and I just want to park it somewhere 
Thanks

Beddie

Tagarete said:

Hello
Not sure if I'm posting my question in the right place, if not please redirect me.
I would be very grateful if someone who understands interest rates and can do maths could tell me, if I open an a savings account with 3.25% AER/gross a year and deposit £30000 for just 2 weeks, what interest might that gain me? I realise that interest won't actually be paid out until the end of a 12 month period. I'm just wondering if it's actually worth doing it for such a short time, the money will be going into my mortgage and I just want to park it somewhere 
Thanks

About £37? someone will tell you to 1/100 of a penny shortly I'm sure!

friolento

You get £2.67 a day. 14 days = £37.40.

If you close an easy access account after 14 days, you get the interest paid immediately. You must read the T&Cs thoroughly, though

friolento

NB, Why a 3.25% account when you can get 5%? Pays £4.11 a day, £57.53 in 14 days.

Stargunner

Tagarete said:

Hello
Not sure if I'm posting my question in the right place, if not please redirect me.
I would be very grateful if someone who understands interest rates and can do maths could tell me, if I open an a savings account with 3.25% AER/gross a year and deposit £30000 for just 2 weeks, what interest might that gain me? I realise that interest won't actually be paid out until the end of a 12 month period. I'm just wondering if it's actually worth doing it for such a short time, the money will be going into my mortgage and I just want to park it somewhere 
Thanks

Why would you want to open a savings account that pays 3.25% interest, because there are other easy access accounts that pay around 5%

EthicsGradient

dickdaby1962 said:

I have a Fixed Term 1 Year ISA valued at £10,932.52 with an interest rate of 5.9% AER

I received £47.43 in interest for March

I was told that the daliy interest rate is 1.63% and that it was calculated for February (29 days) but the bank could not help me any further

Can anybody provide an insight into the calculation of £47.43?

Kind Regards

Can you check the figures you've given us, please? The thing is, 47.43 / 29 = 1.6355 , and "1.63%" obviously can't be a daily interest rate (though 0.0163% could conceivably be), so perhaps that was "£1.63", not "1.63%". The £1.6355 would be 0.01496% per day. Also, can you say the precise days in February and March that you received the interest, so that the 29 days can be verified?