How much ?

[droopydrawers]

WILL £10000 @ 5% PER ANUM BE WORTH IN 5 YEARS.THE INTEREST IS COMPOUNDED YEAR ON YEAR

Many thsnks my old brain doesn't do figures these days,

DD

[MASS1961]

Approx £12,760 give or take a £ or 2

[MASS1961]

I'm curious who is paying 5% for a 5 year investment?
I have some to invest.

[factor-fiction]

I agree with mass1061's figures.
I'm also curious about where such a return might be obtained. Bank of India had what i think was a leading 5 year deal at over 4% pa but that has been withdrawn. Interest rates at the top end have fallen over recent weeks and many of the top offers have been withdrawn.

[fredkins]

I agree, tell me where they are paying this amount of Interest and I'm In.

[factor-fiction]

It may of course be a question about a 5 year bond/fixed savings account that was taken out some time ago when rates were higher and droopydrawers simply wants to know how much to expect when it matures.

[Old_Geezer]

A spreadsheet gives you these answers quite easily. Old brain no barrier.

[factor-fiction]

Google calculator works it it for you too
http://www.google.co.uk/#hl=en&sugexp=les%3B&gs_nf=3&pq=10000*2&cp=14&gs_id=92&xhr=t&q=10000*(1.05)%5E5&pf=p&tbo=d&sclient=psy-ab&oq=10000*(1.05)%5E5&gs_l=&pbx=1&bav=on.2,or.r_gc.r_pw.r_qf.&fp=99c03c7d2e168e48&bpcl=38897761&biw=1073&bih=577

[sunny-dave]

The snag is, factor my old mate, that most of the population don't even know how to do compound interest - let alone how to feed the figures into a calculator.

Why is it socially acceptable (even thought of as 'humorous' or 'normal') to be functionally innumerate, when a similar inability with literacy would be a matter of shame?

[sunny-dave]

NB - my previous post is not in any way having a pop at droopydrawers - just musing on an aspect of societal attitudes.

[factor-fiction]

I agree with you sunny-dave.
I was really responding to Old_Geezer saying that you don't even need to open up a spreadsheet when there's a ready to hand calculator.

It does seem odd to me too that it's socially acceptable to say " I'm rubbish at Maths" but not so acceptable to say " I find reading or writing difficult"

[LCDMAN]

Simple Formula for Compound interest;

Interest = Principle Sum (in £) x rate (in %) x time (in years)
---------------------------------------------
----

100

[LCDMAN]

That'll teach me to be clever with layout! It should be PxRxT all / by 100.

[factor-fiction]

Hi LCDMAN- that is the formula for Simple Interest rather than compund interest.
I can't immediately think of any situation in life where simple interest is used

[factor-fiction]

Compound not compund!

[New Judge]

£12,762.82 if you are a non-taxpayer. £12,166.53 if you pay income tax at the basic rate.

[Prudie]

Of course this could be a compound interest homework question!

[droopydrawers]

Thankyou for the answers, and yes factor30, you got it right too.

This is an old 5 year bond, obviously no longer available. Its the compounded bit that baffles me:-)))

[factor-fiction]

Okay.
Assuming there is no tax to pay on the interest:
At the end of year 1 it's worth £10000 + 5% = £10500
At the end of year 2 it's worth £10500 +5% = £11025
At the end of year 3 it's worth £11025 +5%= £11576.25
At the end of year 4 it's worth £11576.25 +5%= £12155.06
At the end of year 5 it's worth £12155.06 + 5% =£12762.81

If tax is due at the rate of 20% on the interest the net interest rate is 4%, so you would need to adjust the figures accordingly.

[droopydrawers]

Ahh, your a gem factor30. I got to year 2 ok. and then lost the plot lol. Thankyou

DD