# [thechat] Hey Buddy, Can you Spare a Dime?

Matt Warden mwarden at gmail.com
Thu Jul 16 14:01:22 CDT 2009

```On Thu, Jul 16, 2009 at 2:37 PM, Fred Jones<fredthejonester at gmail.com> wrote:
>>> Really? I don't follow how. Because after 5 years I'm only paying
>>> 130%. Am I missing something?
>>
>> No, he's right. The interest rate is 11.15%. I hadn't checked it before
>
> I suppose it's because 11% of the second year is less than the first
> year. 20% less. So that's 8.8%. But calculating that 20% less each
> year for 5 years, it's still more than 30% total. I still don't
> follow. I would think it's actually .5% a month fixed which is 6% a
> year. That times 5 years is the 30% that I am giving the bank.

I don't follow your logic here, but if you pull up a regular ol'
mortgage calculator, you can confirm that it's 11.15%.

Year: 6% of \$100 is \$6

Month:
0.5% of \$100 is \$0.50... \$100.50
0.5% of \$100.50 is \$0.5025... \$101.0025
...
You'll get an effective rate of something like 6.2%

I think you're just dividing the percentages in improper ways, but I can't tell.

--
Matt Warden
Cincinnati, OH, USA
http://mattwarden.com

This email proudly and graciously contributes to entropy.

```