I was told that a man went into the bank and bought a 1 year Certificate of Deposit (CD) for $1,000.00 and would get $600 dollars at the end of the 1 year contract. It took me a nanosecond to realize that would be a 60% return on investment (ROI). I was ready to run to the bank and sign up for one of those. I went to the website of the bank and pulled up their CD rates. Here is what I got:
Term Dividend Rate APY*
3-5 Months 0.30% 0.30%
6-11 Months 0.60% 0.60%
12-17 Months 0.90% 0.90%
18-23 Months 0.90% 0.90%
24-35 Months 1.09% 1.10%
I realized he was reading the chart incorrectly. The rate you are looking at says 3-5 months at 0.30%. In plain english this means you are getting 3% or $30.00 dollars in interest.
The second line says 6-11 months at a rate of 0.60%. In English this means you are getting 6% or $60.00 dollars interest.
I than saw how easy it is to assume that you are getting 60% the Annual Percentage Yield (APY) for the 12-17 months investment.
Here is how it really works: 0.30% means 3% (multiply 0.03 x 10 = 3). You will get $30.00 for your $1,000 investment. After one year.
Think of it this another way:
10% 0f 1,000 dollars is $100 dollars
20% 0f 1,000 dollars is $200 dollars
30% 0f 1,000 dollars is $300 dollars
40% 0f 1,000 dollars is $400 dollars…
Thus 3% of $1,000 = $30.00; 6% of $1,000 = $60.00
Now go to your bank and see what their rates are for investing $1,000 for 12 months and see what they tell you. If you are getting anything more than 3-6%%, let me know that bank. I want going over there and invest in a one year CD.
Until tomorrow! Bless Kobe Bryant and the families who lost their love one in the helicopter crash yesterday. Pray for them!