Dear Mr. Tan,
I am responding to your post on your blog - which is always a great pleasure to read and to follow, by the way.
Date of offer: July 2009
Financial Institution: (insurance company)
Amount of loan: $55,000
Purpose of loan: car loan
Number of repayments: 60 months
Monthly repayment: $1,031 for 59 months, and $1,048 for the final month.
The interest rate which they quoted me was 2.5%, and I would like to find out what is the effective effective interest rate.
REPLY
The total amount that you have to repay is $61,877. After deducting the loan of $55,000, you are paying interest of $6,877 for the 5 years. This works out to a FLAT interest rate of 2.5% per year.
However, as the loan reduces over the period of 5 years, the effective interest rate is higher, at 4.73% per year. I consider this interest rate to be acceptable for a 5 year loan.
Monday, February 1, 2010
Adopt a consistent approach
This simulation game shows that if you adopt a consistent approach in picking stocks, you will be able to get better results in the long run. There may be ups and downs in some years, due to volatility, but the consistency will produce positive results. Some good approaches are:
a) choose the stocks that perform well in recent years, as they are likely to continue to trend
b) choose low PE stocks as they are likely to revert to the average
These are theories that need to verified by practice. This simulation game allows you to try the theory over many years, and see if they work for the model. In real life, you also have to test the model that works well and stick to it.
Click here to try the simulation game on stock picking. Read the guides and share experiences of the Champions (i.e those who reach Level 9).
a) choose the stocks that perform well in recent years, as they are likely to continue to trend
b) choose low PE stocks as they are likely to revert to the average
These are theories that need to verified by practice. This simulation game allows you to try the theory over many years, and see if they work for the model. In real life, you also have to test the model that works well and stick to it.
Click here to try the simulation game on stock picking. Read the guides and share experiences of the Champions (i.e those who reach Level 9).
Foreign currency payments on credit cards
When I pay in a foreign currency by credit card, I trust that the bank will charge a fair conversion rate. But, I never spend the time to check on the conversion rate that they use. Someone told me that the conversion rate is rather high for the consumer. Do you have any information about this? Please share it.
Football on Pay TV
I am glad that Singtel and Starhub are working together on a joint bid for FIFA World Cup. I hope that they can reach an agreement with FIFA so that the World Cup can be broadcast to Singapore homes through both platforms. That would be good for soccer fans in Singapore.
If the operators and FIFA cannot agree on a fixed price, I suggest that they work on a percentage sharing of the revenue from each subscriber or an agreed amount per subscriber (to be paid to FIFA).
Perhaps, Singtel and Starhub can get together to discuss how to make the English Premier League available to many homes who are cuurrently on Starhub. Starhub has offered to do the broadcast for free. I hope that Singtel will take up this offer. It will avoid the pain to Singtel of installing so its new set top boxes to many homes, which is likely to cause a lot of technical and capacity issues.
Tan Kin Lian
If the operators and FIFA cannot agree on a fixed price, I suggest that they work on a percentage sharing of the revenue from each subscriber or an agreed amount per subscriber (to be paid to FIFA).
Perhaps, Singtel and Starhub can get together to discuss how to make the English Premier League available to many homes who are cuurrently on Starhub. Starhub has offered to do the broadcast for free. I hope that Singtel will take up this offer. It will avoid the pain to Singtel of installing so its new set top boxes to many homes, which is likely to cause a lot of technical and capacity issues.
Tan Kin Lian
Bubble in commodity funds
This article explains a potential bubble in commodity funds. It involves complex financial engineering, created by investment banks to earn a fee. This is similar to the debacle on the credit deriviatives. It is better to invest in indexed funds that invest directly in the underlying stocks. Derivatives should be avoided.
Lessons from Canada about banking
Read this report. Canada has a strong agency to product consumers on financial matters. This has kept Canada away from the mistakes made by other countries.
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