Just seen an advert for Santander......

[micmak]

Invest £12,000 in a 3 year bond and they will give you £1,000 up front. Can any of you brainy people work out the interest rate for me, and is it a good deal. Thanks.

[jomifl]

A bit less than 2.5% allowing for compounding and assuming that there is no bonus after 3 years.

[jomifl]

that would be 2.5% per year.

[micmak]

Thanks jomifl. Not such a good deal then :-((

[Sqad]

I make it about 2.7% if the £1,000 is the total interest and as jomilf says no bonus........but i am cr@p at maths.

[Sqad]

AH ! my calculation is for the 3 yr bond......interest at maturity.

[micmak]

Thanks Sqad. The interest is up front. After 3 years you get your 12K back. Not such a good deal after all.

When I had a mortgage the interest on it was quite high. So we didn't have a lot of savings. Now everything is reversed. I think I was born too soon.

[Sqad]

micmak...2.7%or 2.5% it will be gross of tax.

Bad times for the savers.

[Maydup]

You can check and compare the best rates around via this link.

http://www.moneysuper...AAC1:20111204135556:s

[Jonathan-Joe]

Well, I make it an annual rate 2.94% (gross). You pay £12,000 and immediately receive £11,000 back. So, Santander are investing £ 11,000 (not £ 12,000) to pay the promised amount in three years time.
£ 11,000.00 x 1.0294 = £ 11,323.40
£ 11,323.40 x 1.0294 = £ 11,656.31
£ 11,656.31 x 1.0294 = £ 11,999.00
A bit better than previous calculations, enough to tempt you?

[Jonathan-Joe]

Another stupid mis-key. "you ... immediately receive £11,000 back." should of course be "you ... immediately receive £ 1,000 back".

[Jonathan-Joe]

How is the tax accounted for in this deal? If you have to pay tax on the £ 1,000 in the first year, it would be less attractive.