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Rapport CU (Ontario) Promos
February 21, 2019
6:15 am
Nehpets
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A credit union whose name I was unfamiliar with is offering some promotional GIC rates that are listed on their website

Effective February 15, 2019 until March 31, 2019 (according to their website)

21,000 members at 12 branch locations, with close to 90 employees and approximately $430 million in assets under administration

Source for statistics

Stephen

February 21, 2019
6:39 am
Loonie
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Thanks, Stephen.

The five year "de-escalator" Special is impressive. Averages out to 3.89% according to me.
Compare Ganaraska 4 yrs at 4% or DUCA 5 yrs at 3.75% - both of which are not likely to last much longer.
Not quite as good as Meridian's transfer-in promo for registered plans, but this one appears to be available to non-registered.

They say "anyone" can join, and you can do it online. I don't know if that would extend to out-of-province.

February 21, 2019
7:26 am
GR
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Some observations from my perusal of their website and phone call:

Membership limited to Ontario residents.
Can apply online initially, but must go to a branch to show ID and sign documents.
Only a few branches and they are only open Monday to Friday 9 to 5.
The average rate for the 5 year de-escalator GIC is 3.62% p.a.
Potential members should carefully examine the schedule of extensive fees. For example, deceased member account handling fee $100.

February 21, 2019
8:41 pm
Loonie
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The rate averages 3.62 if you just add them up and divide by 5, but I was assuming compounding. I didn't see anything which suggested they were not compounding, but perhaps I missed something?

Compounding with a heavy weight on the first year leads to earnings of $19.45 per $100 at the end of five years.
19.45 /5 = 3.89

The heavy weighting in the first year gives an effect similar to the Meridian 1% transfer-in offer, which bumps up the overall return significantly.

In my view, when rates are uneven, as in all escalator and de-escalator rates, the best way to make true comparisons is by looking at where you'll be in the end.

Accordingly, the DUCA rate is slightly better.
$100 compounded at 3.75% x 5 years = $120.22
This equals an average return of 4.04 per year.
4.04 is .15 higher than 3.89
3.75 is .13 higher than 3.62
It's not a huge difference, but you can see that your improved return is even a little better if you calculate according to end result.

unless I made a mistake...

February 21, 2019
10:03 pm
Norman1
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Loonie said
The rate averages 3.62 if you just add them up and divide by 5, but I was assuming compounding. I didn't see anything which suggested they were not compounding, but perhaps I missed something?

Compounding with a heavy weight on the first year leads to earnings of $19.45 per $100 at the end of five years.
19.45 /5 = 3.89

With compounding, one needs to do a geometric average instead of an arithmetic one.

In five years, $100 becomes ($100 + $19.45)

= $100 x (1 + 0.1945)
= $100 x (1.1945)
= $100 x (1.0361848)5
= $100 x (1 + 0.0361848)5

That implies 0.0361848 = 3.61848% per annum compounded.

3.89% is the equivalent per annum, non-compounded rate of return:

$100 + $19.45 = $100 + $100 x 0.1945
= $100 + $100 x 5 x (0.1945 / 5)
= $100 + $100 x 5 x 0.0389
= $100 + 5 x ($100 x 0.0389)
= $100 + 5 x ($100 x 3.89%)

February 22, 2019
1:07 am
Loonie
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You can call it non-compounding if you want, but I reached it by compounding.

100 + 4.5% + 3.4%+ 3.4%+ 3.4%+ 3.4% = 119.45
119.45 - 100 = 19.45
19.45 / 5 = 3.89 average annual income.

That's what they promise me with the rates quoted, so that's how I work it out. And I imagine that's what most people would do, assuming they can work with percentages at all.

I have no idea what a "geometric average" is or how I would calculate it, or why. It did not come up in my high school algebra or geometry or university statistics, way back when.

To me, what matters with a GIC is what I have earned at the end of it and how many years it took me to get it. In order to find that out, I use the figures they give me. I can compare the result easily to other products of same duration without getting into complex fractions that I don't understand.

If anyone else finds my perspective useful, so be it.

February 22, 2019
4:38 am
hotmony
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"The five year "de-escalator" Special is impressive. Averages out to 3.89%" compounded?

extensive fees mentioned?

February 22, 2019
7:57 am
Norman1
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Loonie said

To me, what matters with a GIC is what I have earned at the end of it and how many years it took me to get it. In order to find that out, I use the figures they give me. I can compare the result easily to other products of same duration without getting into complex fractions that I don't understand.

The $119.45 ending from the $100 start is correct. But, the 3.89% is not.

One can see that if one uses the 3.89%. One does not get the same $119.45 ending:

$100 + 3.89% + 3.89% + 3.89% + 3.89% + 3.89% = $121.0232

That means the de-escalator GIC is not comparable to a vanilla 3.89% 5-year GIC.

February 22, 2019
5:22 pm
julio
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3.62% 5 years compounded

February 22, 2019
10:43 pm
Loonie
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I don't think you've understood me correctly, Norman, but I'm not going to go over it again. I said what I wanted to say. I don't think I can explain it any better, and it's not worth my while to try to do so.

None of my calculations involved adding successive rates of 3.89
It's the end result - after X years- that can be compared, then broken down. But I said all that before.

No doubt it's not the way bankers and economists do it.
I do what I can understand and what makes sense to me.

February 23, 2019
4:36 am
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Assuming compounding, the average rate equals 3.89% per annum over 5-years.

This seems like pretty basic arithmetic OR maybe it's because I just put new batteries in my now 37-year old HP-12C calculator.

February 23, 2019
9:40 am
Norman1
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When there's compounding, the convention is to express the average annual return as a compounded annual growth rate (CAGR).

When the investment doubles in 10 years, for example, the compounded average annual return is not

100% / 10 = 10% per year.

The compounded average annual compounded rate is

10√2 - 1 = 0.07177 = 7.177% per year.

One of the reasons for this convention is compounding investments, like compounding 5-year GIC's, do not have straight-line appreciation, calculated on the initial principal. Instead, they appreciate by an increasing amount each year, based on the principal and increasing amounts of previously-compounded interest.

Another reason is that the CAGR of an escalating or de-escalating compounding GIC is directly comparable to the quoted rates for fixed rate compounding GIC's.

The given Rapport CU de-escalating 5-year GIC is equivalent to a 3.62% compounding 5-year GIC and not a 3.89% one.

February 23, 2019
10:03 am
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Norman1 said

The given Rapport CU de-escalating 5-year GIC is equivalent to a 3.62% compounding 5-year GIC and not a 3.89% one.  

Hmmm ... you're both wrong and correct in the same sentence ...

- assuming compounding, the average rate equals 3.89% per annum over 5-years on the Rapport GIC, at maturity, and not the 3.62% you cite.

and

- assuming compounding for your cited 3.89% GIC, the average rate equals 4.2% per annum at maturity.

Such, such simple arithmetic and yet it's a runaway train wreck on this thread.

Lonnie has already demonstrated the arithmetic so NO need to regurgitate the numbers.

February 23, 2019
10:27 am
Norman1
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Read the first sentence I wrote:

Norman1 said

When there's compounding, the convention is to express the average annual return as a compounded annual growth rate (CAGR).

That's why GR, julio, and I are saying the average return is 3.62% and not the 3.89% that you and Loonie are calculating.

February 23, 2019
10:34 am
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When I run CAGR GICs through Google search, here's Googles response -

Did you mean: cigar geeks

February 23, 2019
12:24 pm
Oscar
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It was actually Norman1 that demonstrated the arithmetic.
If they posted a 5yr@3.62%/annum then it would be easy for most of us to say Duca , for example has a higher rate at 3.75% and that's probably why they didn't.
They also have a 5 year escalator at 1 , 2 , 3 , 4 , and 5% and averages 3%/annum when offered this way to a guy doing math on his fingers like myself but it yields less than a 5yr@3%/annum GIC. So the math does make a difference $$ and I'm glad someone took the time to demonstrate it although it did fly right over me

February 23, 2019
12:54 pm
Jon
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Actually, what Norman suggesting seems like a important skills to have for calculating return on investment. It will be a good idea if Norman, in his free time, can try to teach and explain much more in detail to other members, as it is useful and will help clear the air in here even better.

February 24, 2019
7:08 am
hotmony
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So is rapps 5yr compounded return 3.89 or not?

February 24, 2019
10:02 am
Norman1
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Rapport CU's de-escalating 5-year compounding GIC is 4.5% for the first year and 3.4% for the remaining four years. It's equivalent to

  • a 3.62% 5-year compounding GIC or
  • a 3.89% 5-year non-compunding GIC.
February 24, 2019
10:11 am
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hotmony said
So is rapps 5yr compounded return 3.89 or not?  

It has a return on investment equal to 3.89% per year at maturity.

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