3 ms·
> So today you get 9.62% for 6 months, so you'll technically earn 4.81% interest on your money after 6 months from the date of purchase. That doesn't seem corr
by mgkimsal 4y ago
> So today you get 9.62% for 6 months, so you'll technically earn 4.81% interest on your money after 6 months from the date of purchase.
That doesn't seem correct.
If I have $10k, and it earns an annual rate of 5%, for 6 months, I would get $250. That's not the same as saying I'm earning a 2.5% rate.
You're earning 5%, but only for 6 months.
If you were earning 2.5%, for 6 months, you'd only get $125.
- cjmb 4y agoIn the OP - > [4.81% interest on your money after 6 months from the date of purchase] This is a single concept. The quantity of money earned (4.81%) and the time period over which it is earned (6 months from the date of purchase) are both specified. In your message - > it earns an annual rate of 5%, for 6 months You change the rate to annual here.. > You're earning 5%, Here you leave the time period over which the 5% is earned implicit (1 year) > If you were earning 2.5%, for 6 months, you'd only get $125. And once again here you drop the "per year" Conventionally, finance uses rates of return on an annual basis -- but it's not unreasonable to use another basis so long as that's specified clearly (as in the OP). This helps because the OP is trying to help people understand the dollar-magnitude of returns they are locking in (X% per year, but for half the time -- aka half the sticker price return) and what is variable in the future.