how to calculate the interest according to an old instruction (40 years ago)

0o0o0

Hello 

Would someone please show me how the interest is calculated according to the far below 'paragraph 1'?

The initial amount (outstanding balance) is 10,000 GBP as of 08Nov2024 today.

Would you show me the working for the interest and the resulting total amount payable in one year time 08Nov2025?

Please give me any relevant information so that I can reach the correct amount.

Paragraph 1
To pay interest to be calculated from day to day at the rate of Four Pounds (4.00 GBP) per centum per annum above the base rate of Bank of England [for the ease of calculation, 5 %] then prevailing (with minimum of Ten Pounds (10,00 GBP) per centum per annum) upon all payments due to Recipient A (the recipient of the outstanding balance) with effect from the date fourteen days after such payments become due.

Of note,
This amount of money is not a loan from the bank. This is a legal fee that Recipient A has to collect from the respondent B. The interest of unpaid amounts is calculated as above 'Paragraph 1'. Because the bank is not involved (it is not the money that the bank lent out), the Recipient A has to calculate it themselves.

Please show me the workings of the calculation if you know how to do it. 

Thank you.

silvercar

 at the rate of Four Pounds (4.00 GBP) per centum per annum 

Was this drafted correctly? It seems to be mixing a unit of currency (GBP) with an absolute number. Per centum per annum is an annual rate of interest expressed as a percentage. so if the phrase was "four per centum per annum" I would take it to mean 4%. So if we are assuming the Bank of England base rate is 5%. it would mean an interest rate of 9%.  However, the next phrase then prevailing (with minimum of Ten Pounds (10,00 GBP) per centum per annum) suggests a minimum of 10%. 10% of £10,000 is £1,000 so that is the amount of interest due after one year ie on 8 Nov 2025.

(Not sure if your request for workings requires even more detail, no offence meant if you don't actually need this. 10% means 10 divided by 100. Times the amount loaned which is 10,000. So we have 10 divided by 100 times 10,000 equals 1000. That is the interest - written mathematically as 10/100x10000=1000. Then you add the capital borrowed of 10,000 to give you a total repayment figure of 11,000 written as 10000+1000=11000)

0o0o0

Thank you for your comments.

The reason I am asking this question here is that, as you noted, the phrases "the rate of Four Pounds (4.00 GBP) per centum per annum" and "prevailing (with minimum of Ten Pounds (10,00 GBP) per centum per annum)" confused me.  

This 'paragraph 1' is taken from a signed legally binding document.

So, If indeed "the rate of Four Pounds (4.00 GBP) per centum per annum" and "prevailing (with minimum of Ten Pounds (10,00 GBP) per centum per annum)" are correct phrases, how is the interest to be calculated??

Thank you for your help. 

Alderbank

I was around 40 years ago and would have had no hesitation in reading '£4 per centum' as 'four pounds per hundred pounds'. I suppose if you wanted to show off you could say, 'Four Pounds per centum sui generis' (£4 per hundred of its own kind). 

The phrase 'calculated from day to day' is important. It means the interest is calculated daily so is compound interest compounded daily, not as @silvercar's simple interest formula.

However I would like to know how the interest is to be paid. The default since it is calculated day to day is that it would be paid day to day. However if it is to be added to the principal each day and grossed up then the final total would be more when finally paid as a lump sum.

So long as the BoE rate remains below 6% then the interest rate charged will be 10%, as @silvercar says. However if the BoE rate ever rises above 6% (unlikely now but not impossible) then the total sum will change.

silvercar

Alderbank said:

I was around 40 years ago and would have had no hesitation in reading '£4 per centum' as 'four pounds per hundred pounds'. I suppose if you wanted to show off you could say, 'Four Pounds per centum sui generis' (£4 per hundred of its own kind). 

The phrase 'calculated from day to day' is important. It means the interest is calculated daily so is compound interest compounded daily, not as @silvercar's simple interest formula.

However I would like to know how the interest is to be paid. The default since it is calculated day to day is that it would be paid day to day. However if it is to be added to the principal each day and grossed up then the final total would be more when finally paid as a lump sum.

So long as the BoE rate remains below 6% then the interest rate charged will be 10%, as @silvercar says. However if the BoE rate ever rises above 6% (unlikely now but not impossible) then the total sum will change.

You could take it as interest is calculated daily (in case there is a part repayment of the outstanding loan) but not necessarily added to the loan.

"with effect from the date fourteen days after such payments become due."

So when do payments become due? Is that stated anywhere else in the document? Is there an argument that interest is only charged (as discussed above) if the payments are more than 14 days late?

to simplify it:

To pay interest ...the calculation......upon all payments due to Recipient A (the recipient of the outstanding balance) with effect from the date fourteen days after such payments become due.

could mean that you only pay interest if payments due are more than 14 days late.

0o0o0

Thank you @silvercar and @Alderbank

So, the interest is payable  14 days after the due date (the due date  is explicitly stated in the document). So, until the due date, the amount payable stays 10000 GBP.

 '£4 per centum' as 'four pounds per hundred pounds'  Thank you for this clarification. Much appreciated.

I consider this issue has been resolved.

Thank you.

Keep_pedalling

If nothing has been paid for 40 years with 10% compound interest the amount now due is in excess of £500k. Not that would it be enforceable as it has long been statute barred. 

voluted

0o0o0 said:

Hello 

Would someone please show me how the interest is calculated according to the far below 'paragraph 1'?

The initial amount (outstanding balance) is 10,000 GBP as of 08Nov2024 today.

Would you show me the working for the interest and the resulting total amount payable in one year time 08Nov2025?

Please give me any relevant information so that I can reach the correct amount.

Paragraph 1
To pay interest to be calculated from day to day at the rate of Four Pounds (4.00 GBP) per centum per annum above the base rate of Bank of England [for the ease of calculation, 5 %] then prevailing (with minimum of Ten Pounds (10,00 GBP) per centum per annum) upon all payments due to Recipient A (the recipient of the outstanding balance) with effect from the date fourteen days after such payments become due.

Of note,
This amount of money is not a loan from the bank. This is a legal fee that Recipient A has to collect from the respondent B. The interest of unpaid amounts is calculated as above 'Paragraph 1'. Because the bank is not involved (it is not the money that the bank lent out), the Recipient A has to calculate it themselves.

Please show me the workings of the calculation if you know how to do it. 

Thank you.

The amount owed x 8%pa compounded.

If you want my working, you should pay for a solicitor to calculate it for you, you skinflint.

Keep_pedalling

There are plenty of on line calculators such as this one.

https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php