May 28, 2020
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Finance

Why is Premium Bonds Known As “Premium”?

Putting all your investment in the premium bonds is a complete win to win on both sides of the parties who are involved in it. In support of the government, the overall cost that has been involved in the bonds is somehow much lower within the comparison with the regular bonds. It can even be called as the best investment for the buyers. They will be ending up receiving the higher interest rate, which probably they might not be getting in case if they invest in any other sort of asset investment.

In the middle of the 999,000 bonds that are being as in the series, just 1, 3, or the 660 prizes are being offered all with the 1st, 2nd, and 3rd category of winning. Hence the wholesome probability of winning the 1st, 2nd and 3rd prized is around 0.000001, or 0.000003 plus 0.00066. There would be no such harm if you will be trying your luck. It can be evident that it is your lucky day, and fortune stands in your support. Besides that, even though if you are not lucky enough and you do not win, you will still be earning around 3% of the interest rate as over the premium bond investment. This makes it known as one of the best and yet the proper form of returns on top of any stature investment.

Premium bonds turn out to be much more advantageous for the government as compared to the regular bonds category. It might be somehow too much hard to control in consideration with the hefty returns, which are linked with the bonds. This is how we have added up the calculation for you:

Information about Premium Bond Information
Premium Bond Total Denomination: 40,000
Number of Total bonds in series: 999,999
Number of total series: 1

Description

  • Formula
  • Estimate
  • Result

Total Financing for the government

  • Denomination x no. of the bonds in a form of series
  • 40,000 x 999,999
  • 39,999,960,000

Complete range of Financing in Billion

  • of series x Total financing for the government
  • 1 x 39,999,960,000
  • 40 Billion

Adding Entire Interest Rate

  • Total return rate plus Interest rate
  • 00% + 3.00%
  • 00%

Calculation of the Prizes

  • Prize Amount

Total Expense on the finances (Prize Expense)

  • [Prize Amount x No. of Prize] plus [Prize
  • Amount x No. of Prize] plus [Prize Amount X No. of Prize]/ Times in a year
  • [80,000,000 x 1] + [30,000,000 x 3] + [500,000 x 660]/ 4
  • 2,000,000,000

Calculating Government’s Total % Over Expense on Premium Bonds

  • Expense of the Financing or Total Financing
  • 2,000,000,000/ 39,999,960,000
  • 00%

The overall cost in the category of premium prize bond for any government is around 8.00%, which is quite low as compared to the regular bond, which is about 10%. This whole calculation verdict shows how beneficial the premium bonds are in favor of the government. This will even be letting you come up with the cheaper borrowing. On the whole, we would say that the timeline of premium bonds is giving a benefit to all the parties in which it is offering major returns to investors in the shape of prize bond guess paper , nominal annual based returns as well as low borrowing to government.