Calculate interest rates

[Gollom]

SWMBO has £14k in premium bonds - over the last 12 months has won £900. What is that as an approx. interest rate? (yes, I know I should have paid more attention in maths. But hey, I can cook up a storm and know how to fix 'puters!)

 

[MCFastybloke]

6.43

 

[markjay]

I'm not sure I understand your question.

The winnings are not interest, they are 'return on investment', and so she got around 6.4%.

If it was interest paid monthly, then there would be compound interest to consider, but without knowing the frequency and size of each of the winnings, it's not possible to calculate what it would equate to.

 

[HappytalkAgain]

6.43% Steve.

 

[Gollom]

That's close enough for government work! We just wanted to know if it was better than (for example) a building society. Thanks all

 

[markjay]

That's close enough for government work! We just wanted to know if it was better than (for example) a building society. Thanks all

Yes, that's more than what you might have gotten from a saving account.

However: 'winnings' means luck... so it's not obvious from past performance if it's a good decision or bad decision to keep the money there. Next year you might get double that, ot nought....

My point is that there's an element of gambling there, and therefore, comparing it to the interest from a saving account is probably mathematically meaningless....

 

[BIGDOG]

Don’t forget the premium bond income is tax free.

 

[MikeInWimbledon]

£900 / £14,000 = 6.4% (implying receipt of funds at the end of the period.)

If she received the money during the year and then put it into an interest bearing account, it'll be a tad more.

All gains being tax-free, of course.

The averaged return on Premium bonds, as of March 2024, was 4.4%, averaged across the 24 million Premium Bond holders, so you've outperformed the average this year.

You might find this useful. it's from Money Saving Expert so it's a safe link

https://www.moneysavingexpert.com/savings/premium-bonds-calculator/

 

[Benzowner]

The averaged return on Premium bonds, as of March 2024, was 4.4%, averaged across the 24 million Premium Bond holders, so you've outperformed the average this year.

Probably not boding well for next year then, averages don't usually lie

 

[MikeInWimbledon]

Probably not boding well for next year then, averages don't usually lie

I've just tossed a coin five times and got five heads in a row.

The chance that was 3% (0.5 to the power of 5)

What's the probability of getting a head if I toss that coin again?

 

[LTD]

I've just tossed a coin five times and got five heads in a row.

The chance that was 3% (0.5 to the power of 5)

What's the probability of getting a head if I toss that coin again?

50% probability ignoring the coin landing on it’s edge

 

[MikeInWimbledon]

50% probability ignoring the coin landing on it’s edge

Exactly, past performance doesn't define performance going forward, despite the averaged performance to date.