Ptsb 5 year fixed AER

[mcriot29]

Can any one explain how take 5 fixed from ptsb is 25 percent gross yet aer is 4.56 .
5 years @ 4.56 Is 22.80 gross not 25 percent thanks .

 

[ClubMan]

Compound interest?

 

[Billo]

Have a look at this link :

http://www.investopedia.com/terms/a/aer.asp#axzz1dnxTzJA2

It should show how AER is calculated.

 

[ClubMan]

Good one Billo

So

r = 4.56
n = 5

AER = ((1 + (4.56 / 5)) ^ 5) - 1 = 24.5529%

Close enough!

 

[onq]

Sure what's .45 of a % between friends...

 

[ClubMan]

I'm probably not factoring in some key info...

 

[mcriot29]

.45

Does not still add up.45 is a lot ESP if there was say 800 k in it

 

[ClubMan]

The shortfall could be explained by other missing information such as exactly how they compound the interest (e.g. daily versus monthly or annually) or other nuances of their calculations. Maybe ask them exactly how they do this and see what they say?