UnThreaded | Threaded | Whole Thread (21) | Ignore Thread Prev | Next
Author: mjcalab Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35379  
Subject: Re: CD rate up to 4.7% Date: 3/21/2005 2:20 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I have a 5-yr CD with PFCU and just sent money in for a 4-yr CD paying 4.65% APY. I'm trying to construct a 5-yr ladder with them.

Five year CD yields 5% for five years. Four year CD yields 4.65%.
5%-4.65% = .35%/yr x 4yr =1.40%. Over the four years you are giving up 1.40%. Worst situation with a five year CD is it has to be sold at the end of four years. The penalty is 6 months interest which would be 5%/2=2.5%. What you did is the best choice assuming the five year rate will be greater then 5% in five years. But isn't the situation: buy the 4 year and know that you lose 1.4% or buy the 5 yr and possibly lose 0.9% if you have to sell at the end of four years? How should one look at this?
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (21) | Ignore Thread Prev | Next


Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Value Hounds

My Big Fat Greek Splat
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.