Calculating interest

[sunnyside]

Hi has anyone done a calculatio nto se what interest you should earn from AIb from their regular savers 7% a/c.

If you assume you put in the max of €300 a month, after 12 months what should you have earned.

Am I right in this:
Month 1: 300 x 7% / 12.
Month 2: 600 x 7% / 12
Month 3: 900 x 7% / 12
etc. etc.??

I have got a statement from AIB and earned just 71.52 for 11 months worth of contributions,..I rang and asked but talking to my local branch staff member got me nowhere.
Cheers

 

[mathepac]

Your calculation seems wrong, but I can't reconcile to the banks calculation either as I get €109.20 net of DIRT for the period, assuming that interest on the capital is credited at the end of each month.

I'm probably wrong as maths isn't my strong point.

 

[Slim]

Yeah.I get 109.20 also.

300​

​

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16.8​

​

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300​

​

​

15.4​

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​

300​

​

​

14​

​

​

300​

​

​

12.6​

​

​

300​

​

​

11.2​

​

​

300​

​

​

9.8​

​

​

300​

​

​

8.4​

​

​

300​

​

​

7​

​

​

300​

​

​

5.6​

​

​

300​

​

​

4.2​

​

​

300​

​

​

2.8​

​

​

300​

​

​

1.4​

​

​

109.2​

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​

Sorry about the formatting.

 

[mathepac]

Yeah.I get 109.20 also....

Hmm, I must be learning something on here so as that's the method I used!

 

[Blinder]

Assuming that 11 months contributions are only getting 10 months interest, ( no interst yet on the last month contribution) I get 72.73 after tax when interest paid on the interest, 71.83 after tax , when interest only paid on the contributions.
Interest for month is 1 + interest rate * power (1/12), so monthly interest rate is 0.5654%

 

[darag]

Am I right in this:
Month 1: 300 x 7% / 12.
Month 2: 600 x 7% / 12
Month 3: 900 x 7% / 12
etc. etc.??

Unfortunately the answer is no. Also, I'm not surprised by the branch staff being unable to help; I do IT work for retail banks and interest calculation is often seen as a black art.

The interest plus principal at the end of a period for a single deposit should be:

contribution * power(1 + annual_rate, months_in_deposit/12)​

In your case, for the first contribution for example, this would be

300 * power(1.07, 11/12)
​

Note this assumes it is 11 months elapsed. Obvious this would be very tedius to do this for each of the contributions so that's why I'd always use Excel (or the OpenOffice equivalent, which is free). If you have Excel, the expression

=FV( power(1.07,1/12)-1, 11, -300 )
​

Gives you your answer (net of DIRT). Which in your case is 3,395 which means you've earned 95 interest. If DIRT has been charged then you should have earned 76 euro interest.

However, interest is more likely to be calculated daily rather than monthly which will affect the calculation but not to a huge extent. This also assumes the 7% is AER (annual equivalent rate), which it may not be. By law, loans have to be quoted using an APR while in theory they can quote any sort of figure for savings rates. This is probably the cause of the missing fiver. I'd ask them to specifiy the AER on the account.

 

[askU]

Month 1: 300 x (1+(1.07 (12/ 12))) full 12months/1yr interest
Month 2: 600 x (1+(1.07 / (11/12))) 11 months interest
Month 3: 900 x (1+(0.07 / (10/12))) 10 " "

End of 12months:
300 = 321
600= 638.50
900 = 952.5

TOTAL = €1912

 

[sunnyside]

Hi thanks for all the replies,..it seems like I was short changed by €5 or so. I think it would cost me a lot more in terms of calls, visits and hassle to get the €5 that €5 so will let it lie.

Its annoying though, as across the country if they do this to everyone then they save a fortune,..there has to be a better way of showing their interest calculations.

Cheers

 

[irishlinks]

I doubt if they have short changed you - is the interest shown for exactly 11 months?