2:03 pm

December 7, 2011

CHUCK21 said

SORRY BUT I'M STILL BEFUDDLED. PLEASE CHECK MY MATH. LETS ASSUME HUBERTS RATE TO BE 2.5% FOR JAN, FEB. & MAR.

2.6% FOR APR, MAY & JUNE

2.7% FOR JUL, AUG. & SEPT. AND

2.8% FOR OCT, NOV. & DEC.

THEN WITH A 60,000 INVESTMENT THE FIRST PAYMENT WOULD BE FOR 90 DAYS = $369.86, THE SECOND PAYMENT ON 60,369.86 FOR 91 DAYS = $391.33, THE THIRD PAYMENT ON 61,761.19 FOR 92 DAYS = $420.31 AND THE LAST QUARTERLY PAYMENT ON 62,181.50 FOR 92 DAYS = $438.85 FOR A TOTAL OF 62,620.35.

IF I TAKE THE MID POINT OF THE INTEREST PAYMENTS I GET 2.65 THEREFORE I GET 60,000 X 2.65 = 61,500.00.

WHAT AM I DOING WRONG?

PLEASE EXCUSE THE CAPS AGAIN.

$60,000 investment:

The first payment for 90 days = $369.86

The second payment on 60,369.86 for 91 days = $391.33

The third payment on 60,761.19 for 92 days = $413.51

The last payment on 61,174.70 for 92 days = $431.74

Maturity $61,606.44.

$60,000 x 2.65% = $1,590 + $60,000 = $61,590.

$61,606.44 - $61,590 = $16.44

You will get that $16.44 extra, because quarterly interest actually includes compound interest.

2:59 pm

April 6, 2013

I GET SLIGHTLY DIFFERENT AMOUNTS FOR THE LAST TWO QUARTERS. BUT, I THINK WE HAVE THE RIGHT IDEA:

First Day | Last Day | Days | Rate | Start | Interest |

02-Jan-2019 | 01-Apr-2019 | 90 | 2.50% | $60,000.00 | $369.86 |

02-Apr-2019 | 01-Jul-2019 | 91 | 2.60% | $60,369.86 | $391.33 |

02-Jul-2019 | 01-Oct-2019 | 92 | 2.70% | $60,761.19 | $413.51 |

02-Oct-2019 | 01-Jan-2020 | 92 | 2.80% | $61,174.70 | $431.74 |

Maturity | 365 | $61,606.44 |

3:01 pm

September 30, 2017

3:20 pm

April 6, 2013

THE EQUIVALENT ANNUALLY-COMPOUNDED ONE-YEAR GIC RATE IS THE SLIGHTLY HIGHER GEOMETRIC AVERAGE OF THE QUARTERLY RATES AND NOT THE SIMPLE ARITHMETIC AVERAGE OF 2.65%: | The equivalent annually-compounded one-year GIC rate is the slightly higher geometric average of the quarterly rates and not the simple arithmetic average of 2.65%: |

CAGR = (1 + 90/365 * 2.5%)(1 + 91/365 * 2.6%)(1 + 92/365 * 2.7%)(1 + 92/365 * 2.8%) - 1 = (1 + 0.0061644)(1 + 0.0064822)(1 + 0.0068055)(1 + 0.0070575) - 1 = 1.026774 - 1 = 0.026774 = 2.6774% |

8:38 am

December 7, 2011

8:59 am

December 7, 2016

HI GOJETSGO,

THANKS FOR NOTICING THE ERROR. I HAVE RECALCULATED THE ENTIRE EXERCISE AND FIND THAT THE QUARTERLY INTEREST PAYMENTS STILL RETURN ABOUT $100.00 MORE THAN THE AVERAGE INTEREST RATE.

TO MY WAY OF THINKING, AND DISREGARDING THE OTHER QUARTERLY PERKS, A COMPETITORS INTEREST RATE ONLY HAS TO BE .05% HIGHER THAN HUBERT`S AVERAGE TO RECEIVE THE SAME RETURN.

11:48 am

April 6, 2013

I THINK THE ARITHMETIC IS STILL OFF. | I think the arithmetic is still off. |

WINNIE AND I CALCULATED THE DIFFERENCE TO BE AROUND $16.44. THAT WORKS OUT TO BE ONLY 2.6774% - 2.65% = 0.0274% ABOVE THE 2.65% AVERAGE. | Winnie and I calculated the difference to be around $16.44. That works out to be only 2.6774% - 2.65% = 0.0274% above the 2.65% average. |

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