Interest Over 4 Years

[Anto7]

12% over 4 years on investment (Gross AER 2.87%)
What would be the yearly interest be on £500? Is it 12% or 2.87%?

[Mass_Hysteria]

Petty sure it will be 2.87%

If it's 12% let me know who with? Avg interest at the moment is only 2% pa

[gingejbee]

The "A" stands for "annual" so.....Your £500 would be earning 2.87% over the whole year.

[ubasses]

2.87% is the annual rate

[Mass_Hysteria]

Sorry, 2.87% on £500 would be a huge £14.35 in the year.

.......before tax !

[factor-fiction]

2.87% is the annual rate. With compound interest it works out at 12% over 4 years.
So £500 deposited at the start of the period will be worth £560 at the end of 4 years
At the end of year one will be £14.35 interest

[VHG]

And the second year you will be getting interest on the interest you got the first year.

And the third year you will be getting interest on the interest you earned the first two years.

And the fourth year you will be getting interest on the interest you got the first three years.

So this "extra" interest is why it adds up to 12% over the four years (even though each individual year was only 2.87%)

[Anto7]

Hardly worth investing so.
Thank you all for that info.

[Mass_Hysteria]

Think about getting some premium bonds, the value won't go down, (apart from inflation) you can draw it out when you want and the chance to win up to £1m each month.

http://www.nsandi.com/savings-premium-bonds