92 votes

Investor Paradox. How can you calculate how much is a company worth when buying part of it changes the total value?

You are confusing investment in the company itself with purchasing shares of the company from another person. In your example, the company has $1 worth of assets, and you have 100% of the company. ...
Brady Gilg's user avatar
  • 1,078
83 votes
Accepted

What is the correct answer for percent change when the start amount is zero dollars $0?

There is no numerical convention in finance that I have ever seen. If you look at statements or reports that measure growth when the starting value is negative or zero, you typically see "n/a" or "-" ...
D Stanley's user avatar
  • 133k
54 votes
Accepted

20% APR means only 10% interest? (UK)

The APR is the amount of interest that you would pay if you held their money for a whole year. If you borrowed the £100,000 for a year, didn’t pay anything until the end of the year, and then paid it ...
Ben Miller's user avatar
  • 115k
54 votes

Investor Paradox. How can you calculate how much is a company worth when buying part of it changes the total value?

The important thing to always remember is that you must maintain a separation in your mind between you as individual(s) and the company. Think of the company as a box. Inside that box are assets (e.g. ...
JBentley's user avatar
  • 2,445
41 votes
Accepted

Why does the TD Bank principal portion of a mortgage payment go up and down in sawtooth? (why is interest payment on annuity in arrears non-monotonic)

I'm fairly sure this is because they're including the fact that months aren't all the same length. This is obscured because they don't actually include the relevant dates with the results, or even ...
cjm's user avatar
  • 1,005
32 votes
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What does "not funded by you" mean in Vanguard's college savings planner?

One of the items on the left hand side is "% of cost you plan to cover" which you've set to 50%. So you're expecting that half the cost will be covered by someone else. That's the "...
Justin Cave's user avatar
  • 27.2k
31 votes
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Why didn't the balance go down on the student loan after a big check?

The future interest is not yet a part of the balance you see, it will be added every month. So next month, less interest will be added to the balance (compared to not paying that larger amount). ...
Aganju's user avatar
  • 37.7k
31 votes

At 3% inflation rate, is $100 today worth $40 20 years ago?

$100 20 years ago is still worth $100 today. What changes is what that $100 can buy. Inflation is a measure of how purchasing power changes, and compounds over time. So a better explanation would be: ...
D Stanley's user avatar
  • 133k
29 votes
Accepted

Why the calculated cost of a loan is less than expected? Is the bank working at a loss?

I expect the bank to receive exactly 1120 dollars at the end of the loan (1000 * 112%). At least not including inflation. But the bank receives nominal price of 1066.19 dollars (12 payments of $88.85),...
mhoran_psprep's user avatar
28 votes

How to calculate car insurance quote

First you should understand the basics of how insurance companies make money: In a simple scenario, assume 1,000 have car insurance. Assume that on average, 100 people have accidents per year, and ...
Grade 'Eh' Bacon's user avatar
27 votes

What is the correct answer for percent change when the start amount is zero dollars $0?

A value of zero or a negative value makes the percent change meaningless. Saying 100% when going from 0 to some other value is simply wrong. I have seen a similar situation several times when looking ...
Benjamin Cuningham's user avatar
23 votes

Why isn't there a universal investment standard/benchmark?

Here are some (non-exhaustive) reason why different benchmarks are used, or why a constant benchmark is not optimal: Returns are different in different time periods. In your golf analogy, par is ...
D Stanley's user avatar
  • 133k
22 votes

Formula like Kelly criterion for choosing how much of an investment to liquidate?

There is a simple answer: Look at your stocks and decide whether you would buy them now if you did not own them yet. If your answer is "why should I pay this crazy price?", it is probably ...
Manziel's user avatar
  • 7,422
21 votes

20% APR means only 10% interest? (UK)

Your mistake is that in your calculation of interest ("10%") you divided the total amount of interest paid by the original amount you borrow. However, you don't pay interest for the original amount ...
Weirdo's user avatar
  • 1,211
18 votes

Investor Paradox. How can you calculate how much is a company worth when buying part of it changes the total value?

tl;dr: You asked: Can someone help me understand this? No, because you understand it perfectly already! From a purely mathematical point of view on its own, the sharks are indeed ripping them off. (...
TTT's user avatar
  • 47.2k
17 votes

Paying extra on a mortgage. How much can I save?

Can I pay $12,000 extra once a year or $1000 every month - which option is better? Depends when. If you mean 12K now vs 1K a month over the next 12 months, repeating this each year, now wins. If you ...
Lan's user avatar
  • 2,680
16 votes

Would the minimum payment or full CC amount be considered monthly debt?

You asked, then which monthly debt payment should you calculate? I think the only legitimate answer to this question is, "it depends" (on the context). Why are you doing this calculation and what ...
dwizum's user avatar
  • 17k
16 votes
Accepted

Inflation and the current value of my dollar

Your $100 at t=0 will be worth $55.2 thirty years hence. Something that costs $100 today will cost 100*(1.02)^30 = $181 30 years later. So your original $100 can purchase only 100/181 worth of goods ...
user2371765's user avatar
  • 1,074
13 votes
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What is the formula for the monthly payment on an adjustable rate mortgage?

In an adjustable rate mortgage (ARM), the starting interest rate is guaranteed for a certain period. After this period, the rate can go up or down. The monthly payment on these loans is calculated ...
Ben Miller's user avatar
  • 115k
13 votes
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Time, money and probability: Should i sell my electric bike

Electric bikes are a newish thing, and with it you can expect technology to improve. Considering that, the tech in your current bike, even if new might be considered antiquated in 3 to 5 years. ...
Pete B.'s user avatar
  • 76.2k
13 votes

Why isn't there a universal investment standard/benchmark?

"Why is it easy to set a standardized scoring metric for golf, and not for investments?" Because golf is a sport standardized by various sporting bodies, to the extent that those bodies ...
Grade 'Eh' Bacon's user avatar
12 votes
Accepted

At 3% inflation rate, is $100 today worth $40 20 years ago?

Inflation diminishes value, so the older value would be greater, e.g. At 3% inflation, 20 years ago $180.61 is today worth $100 100 (1 + 0.03)^20 = 180.611 and in 20 years $100 today will be worth $...
Chris Degnen's user avatar
  • 9,747
11 votes
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Thorough Description of Yield to Maturity?

What is a bond price? A bond is an asset, and like any tradeable asset it has a price. If I hold $10K face value of a certain GM bond, then I would be willing to sell it at some price, which may be ...
farnsy's user avatar
  • 15k
11 votes
Accepted

How do I calculate the benefit of contributing to 401K vs paying off consumer debt?

Suppose $X goes to a 401K. After a year this grows to ~1.07 * $X. Profit is ~0.07 * $X Suppose rather that $X goes towards debt. I lose %25 to tax. I save 0.06 * %X on interest. Profit is 0....
Hart CO's user avatar
  • 70.3k
10 votes

Would the minimum payment or full CC amount be considered monthly debt?

which monthly debt payment should you calculate? Since you are treating the CC as "slightly deferred spending" instead of "borrowing", I would not consider that as a debt payment. (Note that I ...
RonJohn's user avatar
  • 50.7k
9 votes
Accepted

How to find an optimum linear combination of various investments?

You're talking about modern portfolio theory. The wiki article goes into the math. Here's the gist: Modern portfolio theory (MPT) is a theory of finance that attempts to maximize portfolio expected ...
Michael A's user avatar
  • 1,948
9 votes
Accepted

Cash Advance causes recurring interest fee after paid in full

Unlike normal charges interest begins accruing on cash advances immediately. On a normal charge you're not charged interest until the grace period is over. You paid interest from the time the cash ...
quid's user avatar
  • 49k
9 votes

Calculating interest for a loan made for a friend on a credit card

16.5% APR is a touch under 1.5% monthly (12th root of 116.5). Assuming lump-sum repayment at the end of the period... Your friend borrowed $3700, held it for 11 months, then repaid. $3700*(116.5^1/...
keshlam's user avatar
  • 44.8k
9 votes

Cost of Living Adjustment

This site gives a cost-of-living index for major cities around the world. Cleveland scores 149, Boston scores 211 and Seattle scores 198. So dividing the salary on offer by the index, you'd be getting ...
Mike Scott's user avatar
  • 23.4k
9 votes

What is the correct answer for percent change when the start amount is zero dollars $0?

I'd personally display "n/a" The only other answer that makes sense to me other is "infinity" (phone keyboard doesn't allow me to input the symbol). This would at least allow you to show direction by ...
Nath's user avatar
  • 191

Only top scored, non community-wiki answers of a minimum length are eligible