Determine interest rates

[ChatMaven]

SWMBO has £14,000 in premium bonds and has accrued £900 in winnings over the last year. What is the approximate interest rate for that? Indeed, I acknowledge that I ought to have devoted more attention to mathematics. However, I possess exceptional culinary skills and am proficient in computer repair.

[PixelMaster]

6.43

[bvlenci]

I am uncertain about my comprehension of your inquiry.

The earnings are not interest; they represent a 'return on investment,' resulting in around 6.4%.

If interest were paid monthly, compound interest would need to be considered; but, without knowledge of the frequency and magnitude of each winning, it is impossible to compute the total amount.

[jimmy47785]

6.43%

[ChatMaven]

That is sufficiently enough for governmental purposes. We sought to ascertain if it surpassed, for instance, a building society. Thank you, everyone.

[bvlenci]

Indeed, that exceeds the potential returns from a savings account.

However, 'winnings' denotes chance; so, prior success does not clearly indicate whether retaining the funds is a prudent or imprudent option. Next year, you may get either twice that amount or nothing at all.

My assertion is that there exists a component of risk, rendering a comparison to interest on a savings account mathematically insignificant.

[DSM10000]

The revenue from premium bonds is exempt from taxation.

[guyskin]

£900 divided by £14,000 is 6.4%, indicating the receiving of monies at the conclusion of the term.

If she received the funds throughout the year and subsequently deposited them into an interest-bearing account, the total amount will be somewhat increased.

All profits are exempt from taxation, naturally.

As of March 2024, the average return on Premium Bonds was 4.4%, calculated among 24 million holders, indicating that you have surpassed the average this year.

This may be beneficial to you. It originates from Money Saving Expert, hence it is a reliable link.

 

[guyskin]

https://www.moneysavingexpert.com/savings/premium-bonds-calculator/

[Trevorseaf]

This likely does not bode good for the next year, since averages are often reliable indicators. 😂

[guyskin]

I have flipped a coin five times and had five consecutive heads.

The probability that was 3% (0.5 raised to the fifth power)

What is the likelihood of obtaining a head if I toss the coin again?

[Matt865]

50% chance excluding the possibility of the coin falling on its edge

[guyskin]

Indeed, historical performance does not guarantee future performance, regardless of the average performance so far.