Quote:
Originally Posted by Bill14564
As I asked another poster, what would your calculation have been over the past five years when CD rates were below 3% or in the past few years when market returns were at or below zero? Today, investing the money rather than paying off the bond makes sense. Yesterday not so much and tomorrow is anybody's guess.
Also, don't forget to include the admin fee in the calculation of effective interest rate.
|
In that case, the effective rate would be the difference between bond interest and CD interest. If the bond was 5%? and the CD 3%, the bond is costing you 2%. And it's not that hard to earn more that CD rates on investments at low risk.
Paying off the bond has high risk you will not recover that money when you sell.