Another compound interest question sorry!

moomi

Hello all,

Right, we have 24,000 in B & B acct at 6.1%. 1st month paid £71 odd then this month has paid £97odd. I understand its due to compund interest but what I wanted to know is can I work out approximately how much we will have in 1 years time if we leave the £24,000 & the interest gained in?

Thankins,

YorkshireBoy

£24,000 x AER%

RichyRich

Compound Interest is calulated as follows:-

Capital times the multiplier to the power of the number of years

So, on £24,000 at 6.1% the calculation would be

£24,000 x 1.061^1 = £25,465 One Year
That's total interest of £1,465, but remember that if tax is deductable that will need to be taken off, at the rate of 20% for a lower rate taxpayer or 40% for a higher rate taxpayer, so that's £1172 (net) interest if you're a lower rate taxpayer or £879 if you pay tax at the higher rate.

Hope to help
Rich

moomi

that explains it brill thank you. yes tax to come off at the basic rate.

Thanks very much for that.