Prize bond formulas, also called premium bond formulas or lottery bond formulas, are a type of mathematical formula that uses previous prize bond results in an attempt to predict winning prize bond combinations in future drawings. Because prize bond combinations, like lottery drawings, are totally random, the effect of prize bond formulas on predicting winning combinations is dubious. While many countries have prize bond drawings, prize bond formulas are most popular in Pakistan.
A prize bond is a type of government-issued security that accrues interest like a traditional savings bond, but also has a small chance of including an additional cash prize. Each prize bond comes with a randomly assigned number or alphanumeric combination. Each month, the issuing authority draws a random number, and the bond holder with that number collects the prize.
The amount a prize bond holder wins depends on the country that issues the bond. In the United Kingdom, where prize bonds were first introduced, a winner with an exact match gets the total interest on all eligible prize bonds. When the government sells numerous prize bonds, the reward is as much as 1 million British Pounds.
Governments often issue prize bonds when they need additional revenue or when few people make other investments. Prize bond schemes are often highly successful, as the government-backed bonds represent a very low risk, low cost way to save money. Because of the potential large cash reward, governments can offer prize bonds at a lower interest rate than other savings bonds, lowering the amount the government must eventually pay the holder.