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, ...
- 125k
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 ...
- 67.9k
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 ...
- 9,377
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 ...
- 37.5k
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 ...
- 647
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 ...
- 22k
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 ...
- 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....
- 25.1k
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 ...
- 48.9k
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 ...
- 66
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 ...
- 2,113
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 ...
- 75.3k
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, ...
- 129k
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 ...
- 129k
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 ...
- 48.9k
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 ...
- 75.5k
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}
- 1,523
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 ...
- 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 ...
- 7,751
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 ...
- 9,377
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. ...
- 50.1k
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:
- 163
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/...
- 125k
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....
- 9,377
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.
- 75.5k
1
vote
Accepted
Why does a short-term certificate of deposit (CD) have a significantly smaller annual percentage yield (APY) than a saving accounts in some banks?
The key item is that on the page for savings accounts:
Rate is variable and may change after the account is opened
That savings account doesn't have a guaranteed rate. It can change tomorrow, and ...
- 129k
1
vote
How does the APY get applied on a CD that is less than one year?
According to this Wikipedia article, https://en.wikipedia.org/wiki/Annual_percentage_yield, the Federally defined meaning of APY produces this formula:
Assuming a 91-day period for the three month ...
- 4,274
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