43
votes
Accepted
Is exceeding the U.K. Personal Savings Allowance - and being taxed - a bad move?
It’s fine, because being taxed as above still leaves me with more than if I hadn’t opened the account (e.g. left the initial £20,000 in an account that didn’t bear interest).
This seems pretty clear-...
31
votes
Accepted
Is there any advantage to a longer term CD that has a lower interest rate than a shorter term CD?
Taking a longer-term CD with a lower interest rate could make sense if you expect CD interest rates to drop in the near future. Suppose you could get a 6-month CD with a 5.1% interest rate, or a 12-...
- 4,595
20
votes
Is exceeding the U.K. Personal Savings Allowance - and being taxed - a bad move?
The goal cannot be to minimise your taxes, but to maximise what ends up in your pocket. If you wanted to minimise your taxes, you'd give all your money to charity and have nothing left. That's not ...
- 23k
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!
...
- 70.5k
10
votes
How can the purchase cost of a treasury bill be more than its face value?
The discount is determined at the auction, no-one guarantees you the 5%. You may end up paying more than the face value if at the auction the discount becomes negative (i.e.: becomes a premium), which ...
- 174k
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 ...
- 879
8
votes
How exactly does a biweekly payment schedule on your mortgage reduce the amount of overall interest paid over the life of the loan?
It depends on how the loan is set up and the lender's policy towards early payments. If the loan is set up with a monthly payment then the payment amount can be computed based on that formula where n=...
- 135k
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 ...
- 424
5
votes
How exactly does a biweekly payment schedule on your mortgage reduce the amount of overall interest paid over the life of the loan?
Payment = [P*(r / n)(1 + r / n)^nt] / [(1 + r / n)^n*t - 1]
where n = 12, P is the loan, and r is the interest rate.
If the periodic rate is given as r / n with n = 12 months, this implies that the ...
- 9,797
5
votes
Is there any advantage to a longer term CD that has a lower interest rate than a shorter term CD?
Note that many high-rate short term CDs are promotional offers, not renewable at that rate, and only available if you deposit "new money" (from another bank) to open them. The goal is to ...
- 46.5k
4
votes
Does the expected return of a stock ETF depend on the current interest level? At which interest rate are stock ETFs no longer recommended?
One way to measure expected return of any investment is the risk-free rate of interest plus some "premium" in exchange for any additional risk. This goes for bonds, stocks, real estate, and ...
- 135k
4
votes
Accepted
If interest rates remain the same, what effect would this have on long term treasuries?
No one can say for certain, since long-term interest rates are essentially the market's projection of what short-term rates will do over that time. So even if short-term rates don't move, the ...
- 135k
4
votes
Accepted
How to calculate monthly payment of a loan
The difference is how you interpret "8% compounded annually" In reality, loan rates are quoted as "annual", meaning the actual monthly interest rate is n/12 (r/n in your formula). ...
- 135k
3
votes
How exactly does a biweekly payment schedule on your mortgage reduce the amount of overall interest paid over the life of the loan?
A mortgage is normally calculated based on monthly payments, that is, 12 payments a year. If you get biweekly payments, that is 26 payments a year. Usually each payment is half the monthly payment.
So ...
- 22.7k
3
votes
Accepted
Should I pay the current balance or the remaining statement balance to avoid paying interest on my US credit card?
To avoid interest, you must have payments that total up to at least the prior statement balance prior to the due date (with possibly some grace period of a few days). The rest of your "current ...
- 135k
3
votes
What is facilitiy fee in islam
“RIBA” in the Muslim religion is charging excessive interest, say 5% a month. Which would be illegal for example in totally non-Islamic German law as well. The difference is that Islam doesn’t set a ...
- 23k
3
votes
Why is the interest on EUR so much lower than USD?
Because the central banks said so. As of writing, the USA's Federal Funds Rate (which is the interbank rate target) is "4.75% to 5.00%" while the ECB deposit rate is 3.00% and fixed rate ...
- 2,839
3
votes
Accepted
Does the expected return of a stock ETF depend on the current interest level? At which interest rate are stock ETFs no longer recommended?
According to the Efficient Market Hypothesis, the risk- and time-adjusted "expected value" of any investment with a sufficiently competitive market is zero. If the an asset is selling for a ...
- 10.3k
2
votes
How do I Calculate future monthly loan payments after interest-only period ends?
Your minimum monthly payments are $93.09. The first month was slightly off due to the interest-only period ending.
I'd also like to point out that $93/mo * 180 months is almost $17k in payments over ...
- 24k
2
votes
How does paying extra on my mortgage affect my amortization schedule?
Others may have made this clear already, but it's an important point: Distinguish between prepaying and paying additional principal.
In the US, the default is often that additional money sent to the ...
- 46.5k
2
votes
How do I know if selling equity is better or not in this problem?
Your equity is currently earning 12.5% per year (750k/6M = 0.125) so it is earning more than your debt would cost. I assume that this property is not earning anything since it's "for personal use&...
- 135k
2
votes
How do I calculate the interest rate on my Treasury bill given an evaluated price?
I've seen some formulas use 366 days instead of 365. How do I know which to use?
You can use either, or use 360, which is common for annualizing yield based purely on a discounted purchase price - as ...
- 135k
2
votes
Accepted
Apportionment of buy-to-let mortgage interest
My personal experience phoning HMRC a few years ago is that such expenses would be proportionally deductible, for instance by square metres or floors.
For instance if letting one self-contained floor ...
- 709
2
votes
Accepted
Present value of an annuity by formula and calculator different
Your calculator most definitely takes the interest rate as a whole percentage number rather than a decimal. try inputting 12 for [I/Y] rather than .12. If you still have issues make sure your ...
- 770
2
votes
How to calculate monthly payment of a loan
As D Stanley comments, the problem is with the rate.
"8% compounded annually" is a 'nominal' rate, as identified by the statement of a compounding period.
A 'nominal rate compounded annually'...
- 9,797
2
votes
1099-int concern, tax filing
No, box 3 is interest only. However, if you've held these bonds for many years, then it would be the total interest accumulated. If you've reported interest as it accrued, you'll need to do some math ...
- 174k
2
votes
Accepted
Calculating non-exempt interest for California income tax
If the fund invests more than half of its assets in bonds from outside California, then all the fund interest is taxable, including that from CA bonds. See the instructions for the CA FTB form 540 ...
- 174k
2
votes
Which loan would be most cost-effective to service first?
Pay off whichever loan is charging you higher real interest. That will save you money.
Or pay off whichever loan you can close out first. That may save you some emotional stress.
Or any combination ...
- 46.5k
1
vote
How exactly does a biweekly payment schedule on your mortgage reduce the amount of overall interest paid over the life of the loan?
Math guy here.
You've confused yourself with that complicated formula, because it is a derivation of the central formula, and the derivation requires certain assumptions to be made.
The core formula ...
1
vote
Can buying mortgage points reduce a rate below the applicable federal rate?
Buying points is essentially prepaying the rate. You can only prepay as much as the bank is willing to let you, usually not a lot compared to the full-priced rate. So while theoretically both things ...
- 174k
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