johnnymk

I loaned a guy $90K two years ago. It was for 4 years at 10%. He is paying me back interest and principle each month. It is similar to a bank loan. The interest will total nearly $20K.

I told a friend of mine that the equivalent rate for a 4 year compounded CD would be around 5%. However, I am getting principle back each month, which I am reinvesting at approx. 4%. Even with that, the total interest probably is no more than 7%, which is nothing to gripe about.

I originally was hoping it was going to be like a CD.

What do you think is the equivalent interest over the 4 years? I am too lazy to figure it out considering that the first month expires after 47 months and the last month principle invested expires immediately.

__________________
“Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.” (Winston Churchill)

mcs328

I used interestratecalculator.com and for 4 years at 10% I got $19,566 in interest. At 4 years at 5% I got $9486. At 4% it's $7541.

I'm no financial wiz or anything since the calculator is used for mortgages. How close am I? Anyone?

__________________

Daedalus

I may not understand the question exactly. You're reinvesting just the principal portion, or the total payment?

If the loan interest is compounding monthly, the payment should be $2,282.63/mo for 48 months (correct me if the compounding is something else).

Investing this payment (again, correct me if you're reinvesting only a portion), once a month @ 4%, you will have $134,041.87 at the end of 4 years, assuming the 4% compounds monthly, as usual.

So, what % on $90k would make $134,031.87 after 4 years?

10.47% APY. Not too shabby.

johnnymk

Yes, I meant I am investing the entire amount at 4%. Hmmm,,better than I thought..Thanks

clutchy

this is a pretty complex calculation, but let me see if i can do anything with it...

$2283/month 1532 is principle and 750 is interest
$19258 for year1 of that 8133 is interest
$21275 yr2 $6116 interest
$23502 yr3 $3889 interest
$25964 yr4 $1428 interest

i'm going to take the easy way out and...
4% on interest earned:
8133 = 9149
9149 + 6116 @ 4% $16511
16511 + 3889 @4 = $21216
21216 + 1428 = $22644

I was going somewhere with all of this, but it's not making much sense to me anymore... are you reinvesting the principle received as well?

ok..

$30811 int + princ @ 4% only compounded once after year 1
62951 @ end of yr. 2
93956 @ end of yr. 3
121348 @ end of yr. 4

7.75? overall?!?! that doesn't make any sense... stupid hp10bII...



ok: i did some more fiddling:

pv = 0
pmt = 2283
i% = 4/12 = .333
N = 48
fv = 118,624

I actually believe this is correct. 6.92%?

if you just did a standard amort at 10% of the 90k you'd get $109,566

difference of $9058 that's not to bad man. please disregard all that nonsene above the pv = 0

__________________
LK was treated unfairly

thanks X

Daedalus

D'oh! My bad, I didn't change the interest rate from 10% to 4% in the 2nd calc. Sorry Johnny.
$118,604.67 after 4 years.
APY = 7.14%

Stupid HP48GX.

johnnymk

7%..that was my original guess. Still not too bad. Thanks, guys