Chapter 12
Figuring Out Interest and Return on Investment
In This Chapter
Getting the lowdown on interest
Breaking the code on compound interest
Examining installment loans and payments
Figuring return on investment
In my experience, most people are a little fuzzy on interest and return on investment. Sure, most people know that interest is the cost of borrowing money or the income from saving money. And they know that they should earn a return on their investments. However, when put in a specific borrowing, saving, or investing situation, people aren’t sure how interest is calculated and exactly what different interest rates mean. And they’re in a fog regarding how rates of return on investments are determined and the assumptions behind these measures of investment performance.
The better you understand interest and return on investment, the better economic citizen and intelligent investor you will be. In this chapter, I explain how interest works and how investment performance is measured using rates of return. I think you’ll find more than a few surprises as you go through it. ...
