UnThreaded | Threaded | Whole Thread (23) | Ignore Thread Prev | Next
Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: Advice needed Date: 9/6/2006 6:09 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 2
Should I hold the CD or sell it now? All advice appreciated.

At this point, I'd just hold it.

In two years, you'll have the $1000 face value of the CD plus another $75 in interest (plus a small additional amount for the compounding of the first year's interest, which I'll just ignore for now). So that's $1075 in two years with the CD.

Based on the current $880 value, you would need to get about 10.5% from an alternative investment over the next two years to get you back to your guaranteed $1075 in two years with the CD. The current $880 value times 1.105^2 is roughly $1075.

You seem to imply that your alternative investment would be expected to give you between 8% and 15%. So I guess it's really your risk profile that's going to make the decision. Do you want a guaranteed $1075 in two years? Or do you want something that's expected to get between 8% ($1026 in two years) and 15% ($1164 in two years), but also has the distinct possibility of being more or less than that range?

For me, I'll take the guaranteed return. But I freely admit that I'm a bit risk averse. And I really don't know anything about that fund. So that's coloring my opinion a bit as well.

--Peter
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (23) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
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:
Macro Economics

Looking at Currency Ratios
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.
Advertisement