ONLINE DEFERRED TAXATION PLAN CALCULATORS
This site calculates how a 401K savings plan benefits you: http://www. bloomberg. com/invest/calculators/401k. html. The bloomberg. com host site is a treasure trove of financial calculators: http:// www. bloomberg. com/invest/calculators/index. …
TRANSFERS
Transfers are “deals” offered by a credit card company to lure you away from another credit card company. Each offered deal is unique, so you might have to do a …
A BENCHMARK SAVINGS PLAN
In order to understand the advantages (and possible pitfalls) of a fixed annuity, it’s useful to compare the annuity to a personal savings plan. The spreadsheet on my website Ch11FixedAnnuities. …
WHY THIS ALL MATTERS
You’ve probably picked up the answer to this already. The only way to compare costs (or values) of two or more transactions is to calculate these costs on the same …
ONLINE CALCULATORS AND LISTINGS
Stock, bond, mutual fund, and option listings are readily available from many sources. If you want to start trading, you can do it over the phone with a broker or …
Mortgages
The common use of the term mortgage today is that a mortgage is simply a loan you take when you buy a house. If I could leave it like that, …
Life Insurance
10.1 WHAT IS AN INSURANCE POLICY? An insurance policy is a contract, usually valid over a specified period of time or term, between you and an insurance company that basically …
PAYMENT ALLOCATION
When you are only partially paying your balances (and paying interest), you will be paying toward two separate balances: your purchase totals and your cash advance totals (I’m leaving possible …
IMMEDIATE ANNUITY WITH PERIOD CERTAIN
An immediate annuity is an annuity that starts making payments immediately. Period certain means that we’re specifying how often the payments are made and how many payments there will be. …
A VERY INVOLVED EXAMPLE: WRITING YOUR OWN SPREADSHEET
As a last example, I’ll present a calculation that probably can’t be done easily using online calculators. In working through it on a spreadsheet, I’ll also be able to easily …
PONZI SCHEMES AND OTHER SCAMS
Suppose that you called two friends tonight and asked them each to drop off $250 at your house in the morning. Then you would suggest that they recoup their money, …
ONLINE CALCULATORS
These calculators are so numerous that I’m sure you can find many more in addition to the ones listed below. These look fairly good and are easy to use without …
INTRODUCTION TO THE LIFE TABLES
Table 10.1 is the 2004 Life Table for all males in the United States. The first column to the left is the age of the man at his last birthday. …
DAILY BALANCE
The daily balances of your purchases and/or cash advances are the amounts on which finance charges are calculated. To understand the details of the finance charge calculation, you first need …
LIFE ANNUITIES
The immediate in immediate annuity means that payments start immediately upon paying the premium. Often, the premium is accumulated by the purchaser over time. With a deferred annuity, the premium …
IN THE LIMIT-CONTINUOUS COMPOUNDING
This section just shows a point that is probably interesting for those comfortable with the math. It’s not a necessary section. However, I recommend looking at the graph and reading …
PRESENT VALUE OF PREPAYMENT PENALTIES
Analogous to the present value is the future value. Present value is the value today of some amounts of money that are known on different dates. Future value is the …
Gambling
You may have been told that any place you put your money that’s not absolutely safe with insured protection is, to some extent, gambling. Accordingly, any investing, whatever the risk …
ADJUSTABLE RATE MORTGAGES (ARMs)
Not all mortgage loans commit to a certain rate of interest for the life of the loan. The ones that don’t commit to this are called, reasonably enough, ARMs. An …
EXPECTED VALUES
Assume that on January 1, 1900, four men whose lives we’d like to follow were born. They of course didn’t know it at the time, but their lives would end …
SOME CALCULATION EXAMPLES
For the following examples, I’m going to start each month (which will have 30 days and will also be the billing period) with the same initial situation: [17] EXAMPLE 6.1 …
PAYMENTS FOR COUPLES
In the case of a married couple, there are several options for structuring the payouts of a life annuity. The first option is what has already been discussed—a defined amount …
Loan Amortization and Savings
3.1 LOANS Many, if not most, loans are repaid with periodic payments. You make monthly mortgage payments, monthly car loan payments, and so on. Although it’s not mathematically necessary, it’s …
Comparing Loans
In the 1981 movie Absence of Malice, Paul Newman played an honest businessman who is related to some organized crime figures. For various plot reasons, a newspaper publishes a story …
PROBABILITY AND ODDS
Two equivalent measuring systems that are commonly used in gambling are the probability of winning (or losing) and the odds of winning (or losing). If there are (W) ways of …
BALLOON LOANS
A balloon loan is one in which the term of the loan (i. e., the number of payments) is just a number on which the monthly payments is calculated. After …
TERM INSURANCE
The simplest kind of life insurance policy you can buy is term insurance. As the name implies, a term insurance policy insures you for a specific term. You pay a …
GRACE PERIOD
The grace period is the period of time during which you are offered 0% interest on your purchases if you pay off your total balance in full. Let me break …
Reverse Mortgages and Viatical Settlements
12.1 REVERSE MORTGAGES A reverse mortgage is a variation on a home equity loan with some insurance and annuity concepts scrambled into the mix. Before going further, I should mention …
CALCULATING THE PAYMENT AMOUNT
Spreadsheets and online calculators handle this calculation very nicely. This section, deriving the formula, can be skipped if you wish. If R is the annual interest rate and y is …
A FEW LAST WORDS
When interest rates go down, it’s time to investigate opportunities for refinancing your home. This means that you look for a new mortgage loan that will replace your old mortgage …
PROBABILITY AND EXPECTED RETURN
In the chapter on Life Insurance, I presented the idea of the probability of a random event (when you are going to die) and the calculation of an expected value …
UP-FRONT COSTS
You won’t see the term up-front costs in your mortgage contract. I’m using the term as a catchall for all the costs and fees involved in starting up a mortgage …
TIME PAYMENTS
If you want to buy a 20-year policy using the data shown in Table 10.3, the premium is $9,340. What if you don’t have this money available? The reasonable answer …
CHANGING INTEREST RATES
If a credit card company decides that your risk as a debtor has changed, the credit card company might increase your interest rates immediately. This decision can be triggered by …
