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Michael Serpe 26 Mar 08 3:03 PM MST When you compare different securities it is very important to know what interest rate that is used in comparison. There are many different CD's, Bonds and tons of different stocks to chose from. You obviously want one that will give you the best rate of return for the amount of money you invested.
Example:
Bond A has a present value of $200 and a compound interest rate of 5% and the length of the bond is 50 years.
Bond B has a present value of $200 and a compound interest rate of 10% and the length of the bond is 25 years.
The future value of Bond A would be:
FVn = PV(1+I)n or ??? = $200(1+5%)n
??? = $200(1.05)to the 50th
??? = $200(11.46)
FV = $2293.48
The future value of Bond B would be:
FVn = PV(1+I)n or ??? = $200(1+10%)n
??? = $200(1.10)to the 25th
??? = $200(10.83)
FV = $2166.94
Then if you were to reinvest the money again for Bond B with the PV = $2166.94, you would have $23,478.16 instead of just the $2293.48 from Bond A.
The basic idea of knowing the interest rate is to get the best return on your investment over the same amount of time as other options.
What else can I help you with?
What is a benefit of comparing personal loans?
Comparing loans is very important when shopping for a personal loan. One main benefit of loan comparison is that, by looking at several different options, a person in need of a loan can get the best interest rate instead of settling for a higher one.
Which is more important Knowledge or Technology and Why?
The comparison is not valid. Its like comparing apples and oranges. Knowledge is the information about stuff that you have in your mind, technology its application.
What should you look for when comparing and contrasting two things?
When comparing and contrasting two things, it's important to look for similarities and differences between them in terms of their characteristics, features, or qualities. Consider how they are similar in certain aspects and how they are different in others. Pay attention to the key points of comparison to gain a better understanding of each.
What is the least important factor when comparison shopping?
The most important factor is the quality of the product you hope to buy; be sure that when you do comparison shopping you compare the product you picked with other products from different stores or companies. The least important factor depends on yourself and what you want. There is no real less important factor of comparison shopping.
Why should investment securities even be separated into different classifications?
The given criteria of company's ability to do as it wishes and its intention to do what it states should definitely not be the sole criteria to be used for classifying investment securities. It is extremely important to classify securities based on their ability and purpose in order to help investors identify the right kind of securities to invest in and make a balanced portfolio.
What is fred's most important monetary policy tool?
Open market operations. The buying and selling of securities in the open market permits flexibility, government securities can be bought and sold daily in different quantities, and the impact on bank reserves is fast.
When comparing the proper position for different exercise you can conclude that in spotting any exercise it is important to?
C. Keep your back upright
What features are important to look for when comparing different models of laptops?
Processor speed, amount of memory, storage space, and screen resolution are some of the most important features to keep in mind when comparing laptops. The size of the laptop, including screen size, is personal preference.
When comparing the proper position for spotting different exercises you can conclude that in spotting any exercise it is important to?
C. Keep your back upright
Why was the northern securities court case important?
la la la
How does FOMC measure inflation expectations?
One of the tools, among probably many others, is comparing the yields between conventional Treasury securities and TIPS (inflation-protected securities sold by the U.S. Treasury). This can provide a useful measure of the market's expectation of future CPI inflation. Measuring inflation expectations is important because people's expectations about inflation influence their behavior in the marketplace and, in turn, have consequences for future inflation.
How can one do a comparison of the interest rates offered by different savings accounts?
This can be done through a comparison site, this will compare all of the offers and will show you which one will be best suited to you! This is a good thing to do when taking out anything that's so important.
