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1 Year Fixed Rate Bond Formula:
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A 1 Year Fixed Rate Bond is a savings product where you deposit money for a fixed term of one year at a predetermined interest rate. Your principal is locked in for the duration, and you receive the agreed interest at maturity.
The calculator uses the simple bond valuation formula:
Where:
Explanation: The formula calculates the total return including both your original principal and the interest earned over the one-year period.
Details: Calculating the maturity value helps you compare different bond offerings, understand your potential returns, and make informed investment decisions for your savings.
Tips: Enter the principal amount in GBP and the annual interest rate as a decimal (e.g., 0.025 for 2.5%). Ensure both values are positive and the rate is between 0 and 1.
Q1: What is the difference between fixed rate bonds and regular savings accounts?
A: Fixed rate bonds offer guaranteed interest rates for a set term but restrict access to funds, while regular savings accounts offer flexibility but typically lower, variable rates.
Q2: Are 1 year fixed rate bonds safe in the UK?
A: Yes, UK fixed rate bonds from FSCS-protected institutions are covered up to £85,000 per person per institution, making them very secure.
Q3: Can I withdraw money early from a fixed rate bond?
A: Typically no, or only with significant penalties. Fixed rate bonds are designed for money you can afford to lock away for the full term.
Q4: How is the interest paid on these bonds?
A: Interest is usually paid at maturity (after one year), though some bonds may offer monthly or annual interest payments.
Q5: Are fixed rate bond returns taxable?
A: Yes, interest earned is subject to tax, but most UK residents have a Personal Savings Allowance. Basic rate taxpayers can earn £1,000 interest tax-free.