820illustrative and comparative purposes, that the principal and interest can be invested at the
821end of the period at the same rate for the rest of the year.”
823Assume a deposit has a gross rate of 6% payable at maturity in 6 months’ time.
825A blended AER of 6.09% should be used by assuming reinvestment at the existing rate
826gross rate for the following 6 month period.
828AER calculation is: (((1+ 6/2*100))^2)-1)*100)
830Providers should not underquote in this scenario by rounding down to 6% but should
831consistently apply the guidelines which assumes reinvestment at the original gross rate for a
832following 6 month period.
838 1. To ensure that AER properly reflects a lower cash holding rate prior to investment
839 into the product proper, where this applies, by requiring the ‘specified date’ to be that
840 on which the provider first expects monies to be received in response to the
841 advertisement. This ensures that the AER reflects the maximum negative impact on
842 return from the lower initial cash holding rate (see AER Guideline A6 - Worked
844 2. To extend the period before advertising needs to be updated with a new recalculated
845 AER beyond 1 month, where the recalculated AER would be higher than the AER
846 used in the existing advertisement (see AER Guideline A6 - Worked Example 2
849AER Guideline A6 - Worked Example 1
853 (including Conditional
856 ONLINE SAVINGS 2.87% N/A
858 Blended rate based on
865 • Online savings account with standard rate of 3% (variable) and indeterminate