Rate Increase for 1-Year Term (average 4.25%) - July 27, 2022 | Hubert Financial | Discussion forum

LeBronBMT said
Just got this email as well. Love these guys. They always impress me with their proactive rate changes. I really wish there were more long-term cashable GIC options around.  

OK - 4.25% if held for ONE year. I had hoped that at least one FI would have a ONE year GIC @5% by now but I am doubting that will happen this year (2022) as we approach August.

Berry said
Signed up last week with their previous rate. Oh well.

I assume there is no rate guarantee?  

No rate guarantee. You could consider redeeming GIC and forego interest and repurchase at the new rate.

Most GIC's I've looked at are compounded annually. So, $100k @ 4.30% for 1Yr will earn you $4,300.

The Hubert 4.25% Qtrly 1 Yr GIC compounds quarterly. So, $100k @ 4.25% will earn you $4,318, effectively a rate of almost 4.32% ... Making it No 2 on the GIC table ...

(Oaken do offer semi-annual and monthly compounding GIC's but at lower rates ...)

No, cgouimet got it right.

100K GIC today will yield:
4.1%/4 * 100,000 = 1,025 Q1
4.2%/4 * 101,025 = 2,086 Q2
4.3%/4 * 102,086 = 3,183 Q3
4.4%/4 * 104,318 = 4,318 Q4

I think that you forgot to calculate the interest earned and paid out each quarter. The earned interest compounds.

BillieBob said

You're right, I did forget to calculate to compound interest earned. Sorry about that cgouimet!  

Always good to do the math ...

cgouimet said
Most GIC's I've looked at are compounded annually. So, $100k @ 4.30% for 1Yr will earn you $4,300.

The Hubert 4.25% Qtrly 1 Yr GIC compounds quarterly. So, $100k @ 4.25% will earn you $4,318, effectively a rate of almost 4.32% ... Making it No 2 on the GIC table ...

(...)  

I understand what you are saying.
Why does Hubert post this :

If you keep your funds in place for the entire year, you’ll earn an average rate of 4.25%* for the year (with compounded interest). Not too shabby, is it? Here’s what you will earn:

The first three months: 4.10%*
Months four to six: 4.20%*
Months seven to nine: 4.30%*
The last three months: 4.40%*

------------
...and specifically say "...(with compounded interest)...?

The average (4.25%) is not the effective per annum (4.32%) when the compounding is more frequent than annually.

FastJonny said

I understand what you are saying.
Why does Hubert post this :

If you keep your funds in place for the entire year, you’ll earn an average rate of 4.25%* for the year (with compounded interest). Not too shabby, is it? Here’s what you will earn:

The first three months: 4.10%*
Months four to six: 4.20%*
Months seven to nine: 4.30%*
The last three months: 4.40%*

------------
...and specifically say "...(with compounded interest)...?  

Math is math, that’s important part. The marketing material is not draft by the math major. Also it’s meant for general public to understand. In this case, what one will receive is actually higher than 4.25, while 4.25 is what most can understand. If they put effective rate of 4.32, most will scratch their head and ‘say what ??’

I should have said ‘they dumb it down for the audience’, which is what this reply sb too lol

Two real life 1Yr Quarterly examples from 2020/1 ...

$15,000.00 @ 2.60% matured @ $15,393.68 for an effective rate of 2.625%.

$15,000.00 @ 1.85% matured @ $15,371.54 for an effective rate of 1.858%.