Coast Capital----here is a cute one! | GIC discussions | Discussion forum

The most I would invest in this is $1. But since I don't have a Coast Capital account, I won't ...

MaxPower19 said
3.75% for a fully cashable gic is competitive.  

Yes, 3.75% for 16 months is "OK" but did you miss the cashable terms part of the offer? Cashable at 0.5% for the first half of the term and gradually increasing to that 3.75% average through the second half of the term ...

If this deposit is compounding monthly, you can't just average the two rates! The first 8 months will earn piddling interest so you won't have as much to start in on the second 8 months. I've checked their site to make sure I understand their terms.

This is an approximation with all months counted as 30 days.
Actual calculations will depend on month and year of deposit.

.5% per annum is .04166.. monthly
3.75% per annum is .3125 monthly

The averaged rate would be
(3.75+.05)/2=2.125% per annum,
0.1770833.. monthly

For the split .5/3.75, $100K becomes $102,869.7725
For constant 2.125, $100K becomes $102,871.2673

Here's a screenshot of my spreadsheet, showing formulae:

[IMAGE FAILED TO LOAD. HOW THE HECK DOES ONE INSERT
AN IMAGE THAT IS NOT ON THE WEB? A FILE:/// RESOURCE
WON'T WORK AS MY DRIVE ISN'T AVAILABLE ON LINE!]

Not a large difference, but this applies to all compounded multi-rate yields. It's often very large, especially with large amounts.
(Non-compounded splits cause no difference.)
RetirEd

Hoping I haven't screwed up and gotten covered with egg on my face.

Alexandra said

Gosh. When I originally posted this, it was done with tongue in cheek. I hope no one here thinks I thought this was a good deal. I mean their HISA account is @1%.
And their one yr GIC is @ 4%. Why would anyone invest in this offering? 8 months @ .50%? Anyway..............so be it.  

Joke on us I suppose. Won't happen again ...

Okay - here I am, trying to upload the spreadsheet shot, having found the Upload Attachment button I failed to locate in my earlier attempts (which included searches on the WordPress site..).

Thanks, cgouimet, and I hope this works despite not having Windows around here, and hence no Windows Explorer. I'm using GNOME's CAJA file manager.

Great! That worked, once I shrunk the Firefox window to let me do a direct drag from the GNOME desktop; cut & paste didn't cut (or paste) it.

Thanks, Norman1, for spotting the compounding info I didn't manage to find on the CC site. Anyway, the principle is the same if one changes the compounding.

Replace the rate/12 entries in B3 and B4 with rate*8/12, and then make all the monthly entries B6 to B12 and B14 to B20 refer to the cell above themselves. Then B14 and B21 will pick up the 8-month rates and correctly show the (now lower) final amount.

The straight-rate calculation will remain the same if comparing to other savings accounts using that method. Or adjust the compounding column D accordingly if seeking to match the actual 8-monthly compounding. In the broader world, this calculation will usually be used on annual-compounding multi-year deposits.

I'm not going to bother doing it, though. Just wanting to remind people that compounded escalator rates cannot be calculated using average interest rates; the effective interest is only calculable using final balance and initial deposit investments. Then you have to use one of those present value or future value or whatever amortization formulae.

Aren't you sorry you read all this?
RetirEd

It's tired and I'm late...

RetirEd said

…
Thanks, Norman1, for spotting the compounding info I didn't manage to find on the CC site. Anyway, the principle is the same if one changes the compounding.

Replace the rate/12 entries in B3 and B4 with rate*8/12, and then make all the monthly entries B6 to B12 and B14 to B20 refer to the cell above themselves. Then B14 and B21 will pick up the 8-month rates and correctly show the (now lower) final amount. …

Unfortunately, it isn't as easy as that to correctly convert eight-month compounding to monthly compounding.

Much easier to do the actual daily accrual with eight-month compounding:

That's equivalent to a more-conventional 3.3746% 16-month GIC that compounds annually and at maturity:

I just got an email bumping up the interest rate to 6.75%:

Saving for the future doesn’t always mean locking up your cash. It doesn’t have to be risky, either.

With our 16 Month Flex GIC, enjoy the flexibility to redeem your investment anytime, with interest payable after the first 30 days. Plus, earn 0.85% for your first 8 months and 6.75% for the last 8 months.*

Your principal investment is always protected and with a guaranteed return, the longer you stay the more it pays

I love it how banks et al now becoming sneaky in trying to lure clients.