Interest Calculation - please help

napoleon

Hi, I got the interest on my B&B Internet Saver 2 account for the month of February today. I reckon they've missed a day's interest and only used 28 days instead of 29 days to calculate. Can someone check my workings just in case I've missed something really obvious before I take up the issue with them and possibly embarrass myself. I've probably missed something really obvious. So thanks if someone can point out any error

Balance at end of January = £203,122.48
Monthly Interest Rate= 6.22% gross or 4.98% after basic rate tax
29 days in February

So 203,122.48 x 6.22/100 x 0.8 x 29/366 = £800.86

So I reckon I should have gotten £800.86, I only got £775.46

Have they missed the extra day because it's a leap year? Thanks

Gorgeous_George

napoleon wrote: »

Hi, I got the interest on my B&B Internet Saver 2 account for the month of February today. I reckon they've missed a day's interest and only used 28 days instead of 29 days to calculate. Can someone check my workings just in case I've missed something really obvious before I take up the issue with them and possibly embarrass myself. I've probably missed something really obvious. So thanks if someone can point out any error

Balance at end of January = £203,122.48
Monthly Interest Rate= 6.22% gross or 4.98% after basic rate tax
29 days in February

So 203,122.48 x 6.22/100 x 0.8 x 29/366 = £800.86

So I reckon I should have gotten £800.46, I only got £775.46

Have they missed the extra day because it's a leap year? Thanks

Where did the 40p go?


GG

napoleon

You mean 40p in the pound income tax??? I only pay 20p in the pound. So that's why I did 6.22% x 0.8

Gorgeous_George

No. Highlighted in red at post #2

I think your 6.22% is the annual equivalent rate (AER). You cannot just divide by 366 to get the daily rate.

That said, I cannot work out how they achieved the aswer that they got.

GG

tomstickland

No, he means your equation gives £800.86 not £800.46

napoleon

Gorgeous_George wrote: »

No. Highlighted in red at post #2

I think your 6.22% is the annual equivalent rate (AER). You cannot just divide by 366 to get the daily rate.

That said, I cannot work out how they achieved the aswer that they got.

GG

Maybe you're right although I thought 6.40% was the AER rate. From their own page:


Internet Saver (2) - Online
Gross pa % = 6.4 Net pa% =5.12
Monthly Gross % = 6.22 Monthly Net % = 4.98

noh

6.22% is the gross rate when paid monthly according to their web site.
The amount they have paid does look to be 28 days interest. Your best course of action is to ask B&B for an explanation of how your interest was calculated.

Nigel

napoleon

noh wrote: »

6.22% is the gross rate when paid monthly according to their web site.
The amount they have paid does look to be 28 days interest. Your best course of action is to ask B&B for an explanation of how your interest was calculated.

Nigel

Yes thanks I will do. They made a mistake with the interest payable a year or so ago so it wouldn't be the first time they've messed up. I just thought I'd check in case I made an obvious error in my workings out.

Gorgeous_George

I agree with noh except the calculation isn't exactly right.

If B&B are doing this, I wonder how many other banks are doing the same. Nice little earner if they get away with it.

And will B&B correct the mistake for everyone or just those who spot it?

GG

Hazzanet

It looks roughly right:

The interest rate is 6.22, so at the end of the year, you'd expect to see 1.0622 times what you put in.

The daily rate is (1-(1.0622^(1/366)))*100; or 0.016448%.

That means that if interest was credited daily, you'd expect to see 1.00016488 times your money after one day.

The interest rate for February would be ~(1.00016488^29); or ~0.479266%

Which gives roughly £973.50 interest.

Less tax at 20%

= £778.80

Hope that helps.

ad44downey

Hazzanet wrote: »

It looks roughly right:

The interest rate is 6.22, so at the end of the year, you'd expect to see 1.0622 times what you put in.
.

but the AER is 6.4%. so surely you'd expect to get 1.064 at the end of the year and not 1.0622 as you state.

I think Bradford and Bingley have made a mistake here, the question is how can they do this sort of cack-handed thing in this day and age. Don't they have computers to work it out or is it some bloke in the back office that works it out on the back on the back of a fag packet? :rolleyes: