Amanda Stanhaus

Tag: interest rate

One Up, One Down.

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Bonds are a safe bet when the market is in meltdown mode.

(click on the bold-faced vocab word:))

But, I’ll get bitten by a bond when the economy is bullish and interest rates rise accordingly. A bond’s worth is best explained in terms of present value (warning: math ahead).

Even though the $$ loaned will not be mine for awhile, I want to know how much it’s worth NOW.

I need to divide the bond’s payoff by (1+ the interest rate).

Sorry, but it’s easier to rationalize with fractions. 2/4 is larger than 2/5.

Accordingly, when interest rates rise the current value of bonds lowers. AKA 1000/1.05 is larger than 1000/1.1.

That one looked painful, so I plug it into a calc.

My savings account cannot wait for the interest rates to skyrocket. But bond-buyers (*especially long-term bond-buyers*) beware!

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(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)

Interest Rate

When using someone else’s money, this determines the associated fee.

(Originally published on Amanda Stanhaus’s  financial literacy vocab blog: XO, Bettie Vocab.)

Debt Deal

I love deals.

Sale shoes. Day old bread. Debt.

(click on the bold-faced vocab words:))

If I’m going to pay off my debt, why not pay it off as cheaply as possible?

When paying off debt, deals can be made with interest rates and the associated interest payments. Sorry, there’s no changing the principle. Unless, maybe if I morph into Hermione, hmm…

mortgage’s interest rate can be lowered when refinanced.

Credit Card or Student Debt can be paid off in full with a line of credit. Lines of credit are known to have negotiable interest rates.

If the interest rate associated with a line of credit is less than the one associated with my current debt, a deal is within reach!

Go grab it!

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(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)

Line of Credit

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At my disposal…

Pre-Anastasia, Christian Grey liked his women this way. I like my money this way.

My line of credit is a loan I have all set if I get in a pickle. Before it’s crunch time, I’m able to negotiate the amount and associated interest rate.

(click on the bold-faced vocab words:))

When I withdraw the $$, only then do I pay interest.

Use responsibly. Use a safe word.

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(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)

Present Value

The value of money in the future discounted to today. I know I will wear those fabulous shoes one day to a black tie. How long in the future? Discount the price by the interest rate and the length of time from the present and I will find the present value.

(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)

Prime Rate

The interest rate banks charge their borrowers.

(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)

Rule of 72

How long will it take to double my investment? The answer is 72 divided by the annual interest rate.

(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)