Financial Math Basics
« Previous EntriesHow to Use the RATE Function in Excel
Tuesday, November 3rd, 2009Yesterday I used the RATE function in Excel for a post. A reader asked me if I could explain the RATE function. This post will attempt to do that.
First off, you use the RATE function when you want to calculate what rate of return would be required to meet a certain goal, based [...]
Reader Question on How to Determine How Your Investments Are Doing
Monday, November 2nd, 2009The following comment was left on this post from last week:
Have a question:
What reasonable standards should investors use to measure how well or poorly that they are doing?
I’m sure that an answer would include “it depends” but if so, depends on what?
We are about 10% under our 12.31.07 balances and we are pleased but how [...]
Is it Irresponsible for Dave Ramsey to Assume a 12% Rate of Return in His Examples?
Thursday, October 8th, 2009My church participated in Dave Ramsey’s “The Total Money Makeover Live!” event a couple of weeks ago. I did not attend the event but did pick up a copy of the workbook that went along with the event.
I have never counted myself among the Dave Ramsey fans. Sure, his advice is better than [...]
Excel Tidbits – Part 1: Using the COUNTIF Function
Thursday, August 6th, 2009I do a lot of stuff with Excel and I have learned some things that go slightly beyond the basics and make the program that much better to use. I still use Excel 2003 so this series of posts will be based on that version.
I got the idea for this post after putting together [...]
How to Annualize a Rate of Return
Wednesday, July 23rd, 2008According to the Vanguard website, the Vanguard S&P 500 Index Fund is down 12.07% YTD as of yesterday’s close. To get an idea of what that return would look like if it were to continue for an entire year, you can annualize the YTD return.
It’s a fairly simple calculation to perform as long as [...]
If You’re Going to Pay Extra on a Loan, Do it Sooner Rather Than Later
Friday, July 18th, 2008The other day I was looking at the amortization for the loan I took out to buy our 2007 Honda Civic. The balance on the loan is now below $10,000 and I immediately thought about paying more on the loan just to get it paid off earlier.
But then I noticed something that [...]
Common Questions – How Much Do I Need to Save for Retirement?
Sunday, April 20th, 2008The other day I asked the following questions in a “Question of the Day” post:
In your opinion, what’s the most confusing aspect of personal finance?
What area gives you the most trouble?
Several commenters stated that they had problems with trying to determine how much they needed to save for retirement.
That’s a tough question for a variety [...]
Probability 101
Friday, April 11th, 2008I’m in the process of reading Peter Bevelin’s awesome book, Seeking Wisdom – From Darwin to Munger (Not an Affiliate Link). I HIGHLY recommend this book for anyone interested in investing and behavioral finance. As boring as that sounds, this book is a page-turner.
One of the sections of the book that I found [...]
What a Loan with a 171.54% APR Looks Like
Sunday, March 16th, 2008How to calculate APR using Microsoft Excel or a financial calculator.
I recently heard about a loan company that specializes in short-term loans. Here’s a typical example of a loan that this company offers:
Loan Amount: $1,250
Loan Term: 36 bi-weekly payments (72 weeks)
Payment Amount: $91.66
Total Payments: $3,299.76 ($91.66 × 36 = $3,299.76)
Total Interest: $2,049.76 ($3,299.76 – [...]
A Look at Publishers Clearing House’s “$5,000 a Week For Life” Giveaway
Monday, January 7th, 2008Publishers Clearing House is currently advertising a promotion where people can win $5,000 per week for the rest of their lives. Sounds pretty good doesn’t it? But, how good is it really?
Lets take a look at the numbers using my age (38) as the basis for the calculations. If I’m lucky enough [...]