Timeline for What is the correct Formula for calculating fund growth with fees
Current License: CC BY-SA 4.0
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| Nov 10, 2023 at 12:21 | comment | added | Chris Degnen |
As a nominal annual interest compounded monthly 9.7% has a periodic monthly rate of r = 0.097/12 = 0.00808333. It is done that way to make calculation easier, i.e. "the true calculation [being] not readily available" – Fed 2008. 9.7% nominal compounded monthly is actually 10.14307% annually: (1 + 0.00808333)^12 - 1 = 0.1014307 in which case the monthly periodic rate would again be r = (1 + 0.1014307)^(1/12) - 1 = 0.00808333. If a rate is quoted as nominal the compounding period should also be stated.
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| Nov 10, 2023 at 9:26 | comment | added | Chris Degnen |
Hi. 9.7% is the rate mentioned in the article. They don't say so I assumed 9.7% nominal annual interest compounded monthly. If it were an effective rate I would have set the monthly periodic rate r = (1 + 0.097)^(1/12) - 1. Or could have just left it all annual with r = 0.097 and n = 40.
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| Nov 10, 2023 at 1:39 | comment | added | achyrd | Sorry, I'm not following. What does the 0.097 represent in r=0.097/12 ? Is that like a 9.7% growth rate? And I'm assuming dividing by 12 is assuming that growth is annual | |
| Nov 6, 2023 at 10:01 | history | answered | Chris Degnen | CC BY-SA 4.0 |