Private Loan

[Richardthomas]

Good evening all,

I've been mulling over the most appropriate way to calculate this and would appreciate any input.

If I made a private loan of £ 23000 in June 1997, how would I calculate it's current worth, given that if I hadn't made the loan, the sum would have remained in a standard bank High Interest Savings Account.

Do you think a fair way of calculating this would be to take the Bank of England base rate (historical data) and apply this?

eg:- from July 1997 to Mar 1998, total the monthly % BoE base rates and divide by 9 to give an average. Then apply that average to the initial
£ 23000 and do this for each subsequent year.

To me, it sounds he fairest.

Do you agree, or am I completely off the beaten track.

Many thanks

[KM-Tiger]

Your basic method is reasonably sound, the dilemma is in which rate of interest to apply. Why the BOE Base Rate? You could consider:-

The actual rate for the high interest account you mention.

The likely rate the person to whom you lent the money would have had to have paid.

I suspect both are higher than base rate.

[Richardthomas]

Thanks for the reply (:

As long as my method of calculation is basically sound, this client would be happy with applying the BofE historical base rates.

I believe the initial loan was made from an HSBC (then Midland) High Interest Savings Account - is interest data available on the net or would one have to request such info in a branch?