Could you please validate the maths?
I've been investing in treasury bills for about a year. Now, they give me around 4% a year, compounding every month.
I just noticed that on the same platform that I am using, I can also buy gilts. Their description is:
6% Treasury Gilt 2028 • UK Market
This gilt matures on 7th December 2028 and offers an annual dividend rate of 6%, paid semi-annually on 7th June and 7th December. If a dividend date falls on a weekend or bank holiday, the dividend will be paid the next working day.The price quoted is for one share. One share equates to £1 of nominal value.
They currently cost 1.06 pounds. If I understand correctly, this means that I will get 6% of the face value every year (a bit more if I reinvest the interests every 6 months).
Suppose that I buy 100 gilts, at maturity, I will get 100x1.06^3 = 119. Given that I paid 106, I'll get 13 pounds. This is approximately 4.3% per year.
But I think that I need to consider also the taxes on the last year.
If I am not mistaken, I would pay less taxes last year because I will be able to detract the lost 6 pounds. That's around 3 pounds of taxes on the last year. So it's like 1 pound a year: 14 in total that corresponds to 4.6%.
If I switch to this gilts, I will take more risks because the interest rate can go up. Of course, if the interests go down, remaining at 4.6% would be good.