Solving the TVM equation for the interest rate

02122020, 09:54 PM
Post: #21




RE: Solving the TVM equation for the interest rate
I'd like to add that getting these interest rates is more important than most people realize. Of course, most math is more important i everyday life than most people understand for that matter.
When comparing two investments or two mortgages or something similar, one should always choose the investment with the best rate or mortgage with the least (if the payments are affordable.) It' isn't (as the radio and TV pseudo financial pseudo advisors sometime say) that one compares the "total of interest payments" or worrying about monthly payments for a purchase no longer owned (or even paying a ballplayer who's been traded.) It's only the interest rate (AKA "rate of return.") A short term mortgage mortgage (15 vs 30) years may have bigger payments but lower interest rates; if one can afford it, the lower rate always give bigger bang for the buck. The same with investments; get the best rate of return. A lower rate on car payments may make longer terms favorable; one may be paying for car (or ball player or house) already traded or sold to achieve a low effective interest rate. Likewise, higher interest means faster retirement fund growth. 

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