I appreciate this may have been explained here before but can someone explain again to me what is the difference between Gross Interest on a Saving A/c and AER? For example in the new AIB On Line 7 Day notice a/c Gross Interest is listed as 4.95% whilst AER is listed as 5%
Difference between Gross Interest and AER?
- Thread starter Mayo1969
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My guess is that the interest on that account is calculated every 6 months so if for example you were saving €100:
after 6 months, interest would be calculated as €2.48 (half of 4.95%) leaving your balance at €102.48
after 12 months, interest would be calculated as €5.01 (half of 4.95%) but calculated on the balance of €102.48 and not €100
so total accumulated after 12 months is €105.01 ie 5% AER (annual equivalent rate) .... well near enough!
hope that makes sense
hope its correct too
after 6 months, interest would be calculated as €2.48 (half of 4.95%) leaving your balance at €102.48
after 12 months, interest would be calculated as €5.01 (half of 4.95%) but calculated on the balance of €102.48 and not €100
so total accumulated after 12 months is €105.01 ie 5% AER (annual equivalent rate) .... well near enough!
hope that makes sense
hope its correct too
GeneralZod
Registered User
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hope that makes sense
hope its correct too
That's correct.
Here's the AER calculation for a gross rate of 4.95% calculated every six months
5.01% = ([1 + 4.95%/(2*100)]^2 -1) * 100
Using formula d from this .