BrianB
Recycles dryer sheets
Sorry if this is a simple question but my math skills have abandoned me today.
I just learned that brokered CD's (like those bought through Fidelity or Schwab) pay simple interest, not compound interest. That started me thinking: How do I calculate the improved return on a monthly pay CD compared to an annual or semi-annual pay CD?
Example using round (not real) numbers:
$10k CD 6% interest paid annually would pay $600 at the end of the year.
$10k CD 6% interest paid monthly would pay $50 at the end of each month. If I put those payments into a 6% money market that compounds daily when received how much more would I have at the end of the year?
Conversely, how much of a discount on the rate should a monthly pay CD have to break even with an annual or semi-annual pay CD?
Is there a built-in Excel function that could simplify this calculation?
BrianB
I just learned that brokered CD's (like those bought through Fidelity or Schwab) pay simple interest, not compound interest. That started me thinking: How do I calculate the improved return on a monthly pay CD compared to an annual or semi-annual pay CD?
Example using round (not real) numbers:
$10k CD 6% interest paid annually would pay $600 at the end of the year.
$10k CD 6% interest paid monthly would pay $50 at the end of each month. If I put those payments into a 6% money market that compounds daily when received how much more would I have at the end of the year?
Conversely, how much of a discount on the rate should a monthly pay CD have to break even with an annual or semi-annual pay CD?
Is there a built-in Excel function that could simplify this calculation?
BrianB