102 votes
Accepted

15 year mortgage vs 30 year paid off in 15

Your calculations are correct if you use the same mortgage rate for both the 15 and 30 year mortgages. However, generally when you apply for a 15 year mortgage the interest rate is significantly less ...
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  • 6,530
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. ...
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  • 1,081
84 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 "-" ...
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  • 113k
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 ...
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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. ...
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  • 2,426
32 votes
Accepted

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 "...
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31 votes
Accepted

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). ...
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  • 36.8k
29 votes

15 year mortgage vs 30 year paid off in 15

"Why would anyone ever get a 15 year instead of just paying off a 30 year in 15 years? Because the rate is not the same. Never that I've seen in my 30 years of following rates. I've seen the rate ...
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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 ...
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26 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 ...
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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 ...
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  • 113k
22 votes
Accepted

If I earn 40 credits and stop working, would I get full Social Security benefits at age 67?

Assuming that you qualify for Social Security and it is still around when you are age 67, the biggest problem you will have is that for decades you will have 0 in your annual earnings. This ...
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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 ...
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  • 6,678
21 votes

Do I owe taxes if my deductions are higher than my income?

There's one factor the previous posters apparently missed here: You say "self-employment tax"--in other words, at least some of that $16k is from self employment. In a normal employment situation ...
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21 votes
Accepted

Is the Social Security retirement benefit calculation based on the last 40 quarters, or overall?

The Social Security payments for retirement are based on 35 years of indexed earnings. If you have less than 35 years of earnings, then your record will have zeros. If you have more than 35 years, the ...
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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 ...
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  • 1,201
19 votes
Accepted

What is the full formula for calculating a FICO 9 credit score?

The FICO score is an invention of one company, FICO (formerly called Fair Isaac). The exact formula is a trade secret that the company does not reveal. This allows them to maintain a monopoly on ...
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  • 23.8k
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. (...
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  • 45.2k
17 votes

If I were to buy something a day before my due date for my credit card bill, would I be charged interest?

At JoeTaxpayer's suggestion, here's a graphical representation. Blue is the statement period (so the period in which you actually buy stuff) and green is the grace period, which you can think of as ...
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  • 34.6k
17 votes

Why might Social Security employee deductions from paycheck vary across pay periods?

Social Security tax only applies to the first $118,500 you earn in a year. See the Social Security Administration's website for more info. You should see a 6.2% increase in after tax earnings now. If ...
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  • 1,230
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 ...
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  • 2,690
16 votes

How are bonuses taxed? Why is withheld amount not same as final amount?

In the US, withholding has nothing to do with your actual tax liability. You control the amounts withheld via form W4 that you provide to your employer. It is up to you what to write in that form, and ...
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  • 127k
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 ...
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  • 16.7k
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 ...
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  • 1,034
15 votes

Can anyone help me understand my loan payment?

If your loan payment schedule was set up correctly, you should have been paying $840.71 per month for 5 years and would have been finished with the loan by 2011. By paying only $700 each month, you ...
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14 votes

15 year mortgage vs 30 year paid off in 15

If the interest rate in both mortgages is the same, then yes, you will end up paying the same amount in interest if both are paid off in 15 years. However, in practice, almost always a 15-year ...
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14 votes
Accepted

Overpaying on mortgage - How is term reduction calculated?

Here is a quick way to estimate the reduction in your term. The numbers you need to start with are in bold. Take the amount of the extra principal payment. For example, £ 500. Take your ...
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  • 3,443
13 votes
Accepted

How does "on the next percentage" work (for company matching)?

That means if you contribute $1000, and that is equal to 5% of your salary (salary of $20k): $400 = 100% match = $400 $400 = 40% match = $160 $200 = 25% match = $50 ------------------------ $1000 = $...
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  • 34.6k
13 votes
Accepted

Why would one W-2 give so much more back than the other?

A way to imagine taxes is as if you were pouring your income into a glass with lines along the side. Up until the first line is free (deduction and exemptions). Everything between that line and the ...
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  • 1,334
13 votes

If I were to buy something a day before my due date for my credit card bill, would I be charged interest?

Generally, no, you would not be charged interest. The reason for this is the concepts of the billing period and the grace period. The billing period is a month-long period that your monthly ...
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