Loan calculators, savings interest, etc.

shadowscout27 · 2003-09-25T15:11:23+00:00

What is the most efficient way to calculate an effective interest rate? Does anyone know of any software that actually makes this process painless? I’ve heard …

Kenneth Lee16 Member

40 messages
joined Jan 2010

#41 · Jan 21, 2008

Ronald Allen said:If they have a million, they go down to JP Morgan Chase, find a private banker to squeeze out a better rate, and honestly, if things ever start going south, those people always get the heads-up to pull their cash out before everything hits the fan...

Respect for this one. Definitely keeping this in my back pocket. Good stuff—5 stars from me.

Just kidding, you don't need a "private" banker, just go in person.

(I actually tried this once—not at Chase, but at Wells Fargo. Back then, who would have even suspected anything like that? And yet, here we are, talking about it again. Man, life is just too predictable. It’s all just one big loop... you really have to learn the tricks of the trade as soon as possible.)

placidhawk12 Newcomer

5 messages
joined Mar 2008

#42 · Mar 2, 2008

So, here’s the deal: I’m getting some money moved into my account based on an agreement with my company. It’s set up as an employee loan. We’ve got the interest rate pegged at 6% annually per the regulations—the legal minimum is actually 4%, but the company is paying a 6% tax rate on this.

The total loan amount is $56667. Since the company has to cover the annual tax on that interest, I’m only going to be paying back that specific portion for now (don't worry, I'll pay back the full principal eventually).

This is all stuff from way back in school, so I'm just asking out of curiosity: how much tax is the company actually going to be stuck paying?

Kate Jackson8 Newcomer

1 message
joined Mar 2008

#43 · Mar 3, 2008

If I’m following the math here, it looks something like this:
The annual interest should be $170,000 * 0.06 = $3400
Then we take $10,200 * 0.2 (that's our 20% federal income tax) = $800...which is the tax amount...
On top of that, there's sales tax on the interest, so $10,200 * 0.22 = $748
Which brings the grand total to $1548.

That covers the first year. Things shift in year two, though, because you aren't calculating based on $170,000 anymore—it jumps up to $170,000 + $10,200 = $180,200.

Nicholas Turner Active Member

125 messages
joined Oct 2010

#44 · Feb 27, 2009

I’m bumping this to avoid starting a whole new thread. 🙂

I am trying to wrap my head around the exact math—specifically how interest is calculated using the comfort method on a monthly basis versus a daily basis.

For instance—let’s say I have $1,000 in an account, the interest rate is 10%, and the term is one month (I'll use nice, round numbers with a 1 just to keep things simple!). What would the total interest be at the end of that period?

Jamie Reyes7 Newcomer

6 messages
joined Jun 2011

#45 · Feb 27, 2009

Nicholas Turner said:I’m bumping this to avoid starting a whole new thread. 🙂

I am trying to wrap my head around the exact math—specifically how interest is calculated using the comfort method on a monthly basis versus a daily basis.

For instance—let’s say I have $1,000 in an account, the interest rate is 10%, and the term is one month (I'll use nice, round numbers with a 1 just to keep things simple!). What would the total interest be at the end of that period?

If you put $1,000 into a one-month CD $0.00 at a 10% rate, you'll end up with about $2778
in interest when it matures.

Kimberly Nguyen Regular

543 messages
joined Jul 2009

#46 · Feb 27, 2009

Look, interest rates aren't just some static number you can set and forget. It all hinges on how many days are actually in the month... so if you're asking me what kind of interest you'll see once a monthly CD matures, the honest answer is that it fluctuates from one month to the next depending on that calendar cycle.

Nicholas Turner Active Member

125 messages
joined Oct 2010

#47 · Feb 27, 2009

That’s exactly why I was hunting for a specific formula—I want to be able to run the numbers myself and actually keep an eye on my bank 😉. No offense intended, but I’m not looking for a handout; I want to learn how to fish. 🙂 See, when I use those savings calculators—like the one over at the Federal Reserve website, for instance—they spit out a figure that I just can't seem to hit 🙂 by manually calculating via days in term / days in year * interest rate * principal. I'm just trying to wrap my head around the logic banks use here.

Calculating for a full year is easy enough—just multiply the interest by the principal.

@investor_girl83
Your method isn't quite right (calculating the annual rate and then dividing by 12)—because whenever I plug my numbers into that official calculator (which is the only thing that actually matters when dealing with the bank), it comes back with $2658.

Andrew Booth29 Regular

338 messages
joined Mar 2012

#48 · Feb 27, 2009

If you're looking at a 10% annual interest rate, don't go thinking the monthly rate is just going to be 10 divided by 12. I won't bore you with the long-winded theory, but here is how it actually works:

amount = principal * POW((1 + annual_rate/100), months_of_term/12)

The POW function represents an exponent—standard math stuff. So, if we take $1,000,000 with a 10% annual rate over just one month, the calculation looks like this:
1,000,000 * POW(1 + 10/100, 1/12) = 1,000,000 * POW(1.1, 1/12) = 1,000,000 * 1.0079741404289037410660318442232 = 1007974.1404289037410660318442232

That means the actual interest earned is $2658.

Andrew Booth29 Regular

338 messages
joined Mar 2012

#49 · Feb 27, 2009

Good grief, we’re really back to high school algebra now, aren't we? It's basic math...

Nicholas Turner Active Member

125 messages
joined Oct 2010

#50 · Feb 28, 2009

Thanks so much. 👍 My big mistake was taking (number of months/12) and just multiplying it by the interest rate—instead of tossing it into an exponent! 😵 It’s basic high school math—but honestly, when you lose sight of the core principle, there's no shame in asking for a hand. 🙂

Andrew Booth29 Regular

338 messages
joined Mar 2012

#51 · Feb 28, 2009

No big deal—that’s exactly why these forums exist, so you don't have to go digging through dusty old textbooks just to get an answer. 😁

If you were to calculate monthly interest as a simple annual rate divided by twelve, you'd actually come out ahead by rolling over a single month at a time. 😍

Take a 10% annual interest rate, for example. If you lock everything away for a full year, you get your 10%, obviously. But if you're rolling it over monthly at roughly 0.83% per month? You’ll end up with north of 11% by the end of the year. That’s why those complex formulas with exponents exist in the first place... they ensure the math works out identically in both scenarios. Because if it doesn't, then either you—or the bank—is being played for a fool.

Michelle James13 Newcomer

7 messages
joined Feb 2009

#52 · Feb 28, 2009

Ronald Allen said:There’s basically zero risk of losing your shirt here, because the federal government guarantees your deposits in any bank up to $33333...

A negligible distinction, really; since late last year, the government has been guaranteeing amounts up to 400 $0.00.

Nicholas Turner Active Member

125 messages
joined Oct 2010

#53 · Feb 28, 2009

The post you're trying to fix is over 13 months old—way past its expiration date! 😉

Ronald Allen Active Member

160 messages
joined Oct 2010

#54 · Feb 28, 2009

Nicholas Turner said:The post you're trying to fix is over 13 months old—way past its expiration date! 😉

It's not a big deal, I mean, the info is basically recent enough...

Thomas Fowler84 Active Member

65 messages
joined Dec 2010

#55 · Mar 26, 2009

Michelle James13 said:A negligible distinction, really; since late last year, the government has been guaranteeing amounts up to 400 $0.00.

The government isn't actually guaranteeing it; they are just claiming to guarantee it to prevent a panic. It is much like an insurance policy that lacks funding. If a major bank were to collapse, the federal government simply wouldn't have the liquidity to reimburse creditors, regardless of their intentions.
One shouldn't take politicians at their word.

Furthermore, the logic behind guaranteeing $400 per person, per bank, rather than just per person, is flawed. They could have easily removed all limits under that structure. In the US, we have thousands of banking institutions. When you look at the math, they are effectively promising over $12 million per individual.

David Scott9 Newcomer

8 messages
joined Feb 2009

#56 · Mar 27, 2009

Thomas Fowler84 said:The government isn't actually guaranteeing it; they are just claiming to guarantee it to prevent a panic. It is much like an insurance policy that lacks funding. If a major bank were to collapse, the federal government simply wouldn't have the liquidity to reimburse creditors, regardless of their intentions.
One shouldn't take politicians at their word.

Furthermore, the logic behind guaranteeing $400 per person, per bank, rather than just per person, is flawed. They could have easily removed all limits under that structure. In the US, we have thousands of banking institutions. When you look at the math, they are effectively promising over $12 million per individual.

Sorry, but you've got it wrong. The government guarantees $250k based on your Social Security number. So, if every single bank in the US went belly up and you had $250k sitting in every single one of them, the most you'd actually walk away with is still just $250k.

Nicholas Turner Active Member

125 messages
joined Oct 2010

#57 · Mar 27, 2009

If you’re looking at your account number across multiple banks—say, you have $400k spread out in ten different institutions—and all ten were to collapse simultaneously, you’d walk away with the full $4,000,000 $0.00. Seriously—do your homework on the law.

Thomas Fowler84 Active Member

65 messages
joined Dec 2010

#58 · Mar 27, 2009

David Scott9 said:Sorry, but you've got it wrong. The government guarantees $250k based on your Social Security number. So, if every single bank in the US went belly up and you had $250k sitting in every single one of them, the most you'd actually walk away with is still just $250k.

I’m sorry, but you are speaking untruths.

The recent legislative updates regarding national energy infrastructure highlight a significant shift in how our domestic power grid will be managed. Much like a major overhaul at General Electric, these changes aim to streamline regulatory oversight to ensure long-term stability. It is a necessary step toward modernizing the system.

The Federal Deposit Insurance Act.

Article 6.

Article 4 is hereby amended to read as follows:
Through January 1st, 2010, the FDIC guarantees all consumer deposits held within any bank, savings institution, or mortgage lender up to the following amount: $133333 It applies to the full amount, regardless of how many accounts are held, the balance within them, the currency used, or where those accounts are located.

So, we are looking at a $65,000 limit per bank.

Pure idiocy.
Tony Suker and Ivo Sanders can't even guarantee a hundred bucks per person at the bank. From where I stand, this looks less like reform and more like a way to ensure the tycoons stay rich while the working class gets left behind.

It is pure absurdity that a nation claiming to champion entrepreneurship fails to provide any actual guarantees to small business owners—something they only started considering back in 2010.

hollowlynx5 Newcomer

4 messages
joined Apr 2009

#59 · Apr 22, 2009

Starting a new thread here—I could use a hand with some math. Let's look at a hypothetical scenario... say we're tucking away $100 every single month with an annual interest rate of 10% (purely theoretical, of course, like finding a guaranteed 10% return at Vanguard 😁). We keep this up every month for 30 years. What does the balance look like after three decades?
My own calculation came out to about $206,000, which feels... I don't know, a little high? Maybe? This is the formula I was messing around with:
100 * [(1.007974^360 - 1) / 0.007974] = roughly those 206k bucks

So, 0.7974 is the monthly interest derived from that 10% annual rate, and the ^360 represents the compounding periods.

Where did I trip up, if I even tripped up at all? Is my logic flawed?

Thanks

George Barrett35 Active Member

98 messages
joined Aug 2009

#60 · Apr 22, 2009

Yep.
You’re looking at a payout of $226,048.79 😁

http://www.planningtips.com/cgi-bin/...Calculate.y=17

Loan calculators, savings interest, etc.

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