A bank advertised two loans as follows:
a) Fixed repayment. Low interest rate of 7.5% p.a.
b) Flexible repayment. Low fund transfer rate of 0.3% per month for 6 months.
30% cash back on the interest charges for one year.
The small print at the bottom of the advertisement says:
a) The effective interest rate are 13.8% p.a. for 2 years, 13.69% p.a. for 3 years, etc
b) The effective interest rate is 10.05% for the first year. The prevailing interest rate of 16.5% p.a. applies thereafter.
Do not be misled by the lower interest rate that was advertised. Look for the effective interest rate. Are you prepared to pay an annual interest rate of about 13% on the loan?
Lesson: You should save now and spend later. If you lend to yourself (i.e. from your past savings), you can earn a yield of 13% p.a. (i.e. the interest rate that you have to pay on a loan).
Monday, April 7, 2008
Term Insurance with Cashback
Hi Mr Tan,
You are an expert in this subject. In the newspaper article it was mentioned by the reporter that with the term insurance covered for $400,000 annual premium of less than a thousand and yet there are cash back guarantee features.
Do you know of any such insurance company. I will be interested to purchase such policy.
REPLY
You can call the insurance companies listed in this FAQ:http://www.tankinlian.com/faq/termd.html
This FAQ shows the benchmark premium rates.
http://www.tankinlian.com/faq/benchmark.html
If you are quoted a premium closed to the benchmark rate, you can accept it.
In most cases it is better to buy a Term insurance without any cash back feature. You pay a lower premium. If you invest the difference separately, you can get a better return compared to the cash back.
American Depository Receipt (ADR)
An American Depositary Receipt (or ADR) represents ownership in the shares of a foreign company trading on US financial markets. The stock of many non-US companies trades on US exchanges through the use of ADRs. ADRs enable US investors to buy shares in foreign companies without undertaking cross-border transactions. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies.
Each ADR is issued by a US depositary bank and can represent a fraction of a share, a single share, or multiple shares of foreign stock. An owner of an ADR has the right to obtain the foreign stock it represents, but US investors usually find it more convenient simply to own the ADR. The price of an ADR is often close to the price of the foreign stock in its home market, adjusted for the ratio of ADRs to foreign company shares.
Depository banks have numerous responsibilities to an ADR holder and to the non-US company the ADR represents. The first ADR was introduced by JPMorgan in 1927, for the British retailer Selfridges&Co. The largest depositary bank is the Bank of New York Mellon.
Individual shares of a foreign corporation represented by an ADR are called American Depositary Shares (ADS).
Each ADR is issued by a US depositary bank and can represent a fraction of a share, a single share, or multiple shares of foreign stock. An owner of an ADR has the right to obtain the foreign stock it represents, but US investors usually find it more convenient simply to own the ADR. The price of an ADR is often close to the price of the foreign stock in its home market, adjusted for the ratio of ADRs to foreign company shares.
Depository banks have numerous responsibilities to an ADR holder and to the non-US company the ADR represents. The first ADR was introduced by JPMorgan in 1927, for the British retailer Selfridges&Co. The largest depositary bank is the Bank of New York Mellon.
Individual shares of a foreign corporation represented by an ADR are called American Depositary Shares (ADS).
CPF pays higher interest than treasury bills
Hi Mr Tan,
I have read your newspapers articles and about your website, find that you are a very knowledgable person in the finance field.
As a student, I have always wanted to know more about investments. My question is, can I get higher interest by investing in 3 months treasury bills or just leave my money in CPF for 3 months?
http://www.sgs.gov.sg/announce/bill-announce.html
http://www.sgs.gov.sg/announce/bill-result.html )
REPLY
It is better to leave your money in CPF as you earn 2.5% interest plus a bonus of 1%. Short term treasury bills pay less than 1% interest.
I have read your newspapers articles and about your website, find that you are a very knowledgable person in the finance field.
As a student, I have always wanted to know more about investments. My question is, can I get higher interest by investing in 3 months treasury bills or just leave my money in CPF for 3 months?
http://www.sgs.gov.sg/announce/bill-announce.html
http://www.sgs.gov.sg/announce/bill-result.html )
REPLY
It is better to leave your money in CPF as you earn 2.5% interest plus a bonus of 1%. Short term treasury bills pay less than 1% interest.
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