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23 votes

What is the typical compounding/amortized period on US mortgage loans

Actually, mortgages do not "compound" at all. Compounding means that interest is charged on top of past interest, which is not true for mortgages. Conforming mortgages in the US use simple interest, ...
D Stanley's user avatar
  • 133k
19 votes

Should I pay off mortgage or invest in CD?

Assume I have $50,000 loan that I could pay off (2.875 rate) which I could invest in CD with 5.5 rate for 12 months, could anyone please tell me what would be the correct calculations? Thanks! ...
Hart CO's user avatar
  • 70.3k
14 votes
Accepted

How does Robinhood’s cash sweep achieve 4% interest?

I opened an 11-month CD yesterday at 5% with Capital One, and rates were over 4% on all longer terms. If individuals have fixed rate options >4% then it makes sense that there are some variable ...
Hart CO's user avatar
  • 70.3k
13 votes

"Simple interest rate of 0.10%" corresponds to "APY of 2.54%-5.00%"... how?

It appears that qualifying accounts up to $5,000 earn 5% APY. Anything above $5,000 earns 0.1% (apparently per annum), so a total balance of $10,000 earns 5% APY on one half and 0.1% on the other ...
Chris Degnen's user avatar
  • 9,747
11 votes

"Simple interest rate of 0.10%" corresponds to "APY of 2.54%-5.00%"... how?

If you would've copied to sentence before this sentence, it would be quite obvious: UltimateAccount annual percentage yield (APY) is 5.00% on balances up to $5,000. Balances above $5,000 earn a ...
Aganju's user avatar
  • 37.7k
8 votes

How does Robinhood’s cash sweep achieve 4% interest?

Even if they're not really taking any risk, the one-month US treasury yield is currently around 4.6%. I think banks can treat these as effectively-cash and it's trivial to buy and sell them, so it ...
Brendan Long's user avatar
8 votes

Should I pay off mortgage or invest in CD?

I think you have a decided advantage with the limited duration of 12 months on the CD. The difference between the rates is minor, but not insignificant, especially when you consider the return on ...
fred_dot_u's user avatar
8 votes
Accepted

Mistake in Investopedia's article on APY?

No, he's correct. The interest rate is not 0.5% per YEAR, it's 0.5% per MONTH. His point is that he's comparing getting 6% paid at one time at the end of the year, versus 6% nominal annual rate paid ...
Jay's user avatar
  • 22.6k
7 votes

Help me understand and calculate credit union interest in Google Sheets

0.250% of what? Because $100 x 0.25% = $25. How am I getting $0.02 a month? You're confusing "25%" (twenty-five percent) with "0.25%" (one quarter of one percent). Your credit union is making ...
Tom W's user avatar
  • 171
6 votes
Accepted

How can Genisys afford to pay 4.07% APY on checking accounts?

They're paying interest on $7500 in balance so $352.50 per year. If you're using a debit card, they're making a couple percent in merchant fees. If you were using a credit card, you could get, say, 1....
Justin Cave's user avatar
  • 27.2k
6 votes

Should I pay off mortgage or invest in CD?

I actually made a google sheet comparing basically what you are talking about a while ago. The sheet isn't perfect and there are some missing variables but you can sort of see what math is involved in ...
jesse_b's user avatar
  • 424
5 votes
Accepted

Need help figuring out what yearly interest would be?

The interest rate/dividend rate is an annual amount. You can roughly calculate your interest earnings for a single period by dividing the rate by the number compounding periods then multiplying that ...
quid's user avatar
  • 49k
5 votes
Accepted

"Simple interest rate of 0.10%" corresponds to "APY of 2.54%-5.00%"... how?

Aganju's response above is spot-on. The rationale for the range of APY is 'banking compliance regulations.' Our regulators require for the disclosure of what APY you could earn. Our Ultimate ...
Bill Clancy's user avatar
5 votes

Does it make sense to ladder CD's if the APY is the same for different periods?

Another reason to invest in longer term CDs is to hedge against rates going down in the future. There might not be much difference in a 3 year and a 4 year in terms of rate but in 3 years that CD ...
user1723699's user avatar
  • 2,113
3 votes
Accepted

How to calculate the APY of an investment account?

If you want to calculate the effective yield of a portfolio, two common methods are Time-Weighted Return and Money-Weighted Return. Money-Weighted Return is essentially the IRR of the portfolio, which ...
D Stanley's user avatar
  • 133k
3 votes

Does it make sense to ladder CD's if the APY is the same for different periods?

This all depends on the goal of your ladder and a bit of looking into the "crystal bll". Basically the banks think that interest rates will be lower in the future so they are not looking to ...
Pete B.'s user avatar
  • 76.2k
3 votes

CDs vs saving account - which is better if both have same APY?

The particular CD is 7-Month No-Penalty CD : No-Penalty CD. Lock in a great rate without locking in your money With our No-Penalty CD, you get the power to earn a competitive fixed rate, ...
mhoran_psprep's user avatar
3 votes

Does it make sense to ladder CD's if the APY is the same for different periods?

One reason for using a CD ladder is to stagger the maturity dates over the year. When starting out it is typical to buy CDs of differing lengths but the same start date. Then as each of the shorter ...
mhoran_psprep's user avatar
2 votes
Accepted

How does the APY get applied on a CD that is less than one year?

To clarify. APY will always be an annual number. To calculate your APY you use the formulas below with your APR, the applicable compounding frequency, and duration of an entire year. The more ...
quid's user avatar
  • 49k
2 votes
Accepted

Proper way to annualize returns

Yes, the difference between the two formulas is based on whether the investment is compounding or not. Your first link states this: Take note that the effective annualized rate will depend on how ...
Bob Baerker's user avatar
  • 76.1k
2 votes
Accepted

Finding the price of an item years earlier from compound interest, simple interest, or APY

The math is a straightforward rearrangement of the time value of money equation. Just treat the FV amount as the current amount and the PV as the past amount. PV = FV/{(1+i)^n}
T. M.'s user avatar
  • 1,523
2 votes
Accepted

If APY factors compounding (while APR doesn't), shouldn't APY always be higher than APR?

Why is this lower? Does the APY for amortization schedules work differently (because interest is front-loaded or whatever)? But since the loan only lasts one year, how would that even make a ...
Hart CO's user avatar
  • 70.3k
2 votes

Calculating Effective Annual Interest Rate & Annual Percentage Rate with fees (in R)

First, you can throw that Investopedia APR formula out of the window. That formula is only for one-time payment under 1 year e.g. Credit Card Payment. Second, for the current code, I can confirm the ...
base64's user avatar
  • 10.2k
1 vote

How does Robinhood’s cash sweep achieve 4% interest?

It's really not that impressive as it's comparable to money market funds offered by other brokers. For example, Fidelity's SPAXX shows a 7-day yield of 4.2%. There's also nothing guaranteed about the ...
0xFEE1DEAD's user avatar
  • 8,498
1 vote

Calculating daily yields with a different compounding interest

"suppose I had $1000 as an initial investment, by day two I would have $1010. That $10 would then be rolled into the 10% APY account. This cycle would repeat every day." It sounds like you ...
Chris Degnen's user avatar
  • 9,747
1 vote

Proper way to annualize returns

I use Excel's built-in =RRI() function: "Returns an equivalent interest rate for the growth of an investment." In your case, =RRI(73,10000,11000) = 0.13065% compound growth per day. ...
RonJohn's user avatar
  • 50.7k
1 vote

Calculate APY given start balance, end balance, and term

I decided to go with the solution a friend gave me, since it gives me continuous compounding:
Nathan Arthur's user avatar
1 vote

Calculate APY given start balance, end balance, and term

The formula for APY is essentially solving the future value (or present value) formula for the rate: end_bal = start_bal * (1+APY)^N ==> (1+APY)^N = (end_bal/start_bal) ==> 1+APY = (end_bal/...
D Stanley's user avatar
  • 133k
1 vote
Accepted

Calculating APY and compounding rates of investment on Coinbase

With reference to the Wikipedia nominal interest rate calculation The USDC Rewards Rate is a nominal (annual) rate compounded monthly, from which the monthly rate m is obtained by division, i.e. m = 0....
Chris Degnen's user avatar
  • 9,747
1 vote

CDs vs saving account - which is better if both have same APY?

If rates drop, being locked into the CD will be better. If rates rise, not being locked into the CD will be better since money market rates will rise.
Bob Baerker's user avatar
  • 76.1k

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