Just A Litte Interest

Prudential recently announced that with profit payments, its policyholders in the United Kingdom who had contributed £50 per month for 25 years would receive £31,438. A quick calculation shows that the annual return on this investment was an APR of 5.36 percent. By now, you should know a small difference in interest rates can result in a large difference in future values because of the effect of compounding. For example, a similar policy with Aviva had an ending balance of £28,869, an APR of 4.79 percent. So, over  this period, a difference of .57 percent per year resulted in a difference in the future value of £2,569. Policies by Standard Life, with an ending balance of £27,304 returned 4.41 percent, and Scottish Widows policies returned £25,842, or 4.04 percent.