Thread: Economics Investments & Personal Finance
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Old 01-25-2013, 08:43 AM   #5
Amnorix Amnorix is offline
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Join Date: May 2003
Location: Boston, Mass.
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Quote:
Originally Posted by La literatura View Post
Just for fun, with an interest rate of 8%, a $10K initial deposit into a savings account would yield $20K in 9 years. But with an interest rate of 1.5%, it would take 48 years to reach that amount.

That is fun to think about, no?

So, what can get me a return on my investment of 8%? That's what I want.

Sure, fun, but you're forgetting (as everyone does), that money was tighter then, and inflation higher, and loan rates much higher. The average person could make 5+% on a bank account, and 8+% on a CD, but had to pay 10+% on their mortgage and 12% on their car loan while inflation is going up 5% per year. Your investment returns are subject to the LAW of inflation. If you make 1% on your ultra-conservative CD and inflation goes up 2%, you have LOST purchasing power.

Everything is relative to everything else. A 5% return in a 3% CPI inflationary year is BETTER than an 8% return in a 10% year (God help us).
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