Bank closures are still happening. The FDIC watch list is continuing to grow. Do not let your guard down. Make sure that your accounts are under the FDIC insurance limit of $250k and are in accounts that are covered by FDIC insurance.

## Calculator Problem – 2010-10-11

If you could pay off a loan of $500,000 with monthly payments of $1625 over 30 years, what would be the interest rate on the loan?

(The answer will be posted with the new calculator problem in 2 weeks. Or if you can’t wait that long, you can go to http://www.facebook.com/pages/Gary-Johnston-Seminars/111368472221424 for the answer.)

Answer to 2010-09-27 problem:

I=86.86% (N=48, PV= -2000, PMT=150, FV=0)

## Foreclosures – part 2

On Friday, Bank of America announced it was freezing foreclosures in all 50 states. http://mediaroom.bankofamerica.com/phoenix.zhtml?c=234503&p=irol-newsArticle&ID=1480657&highlight=. The issue stems from some court cases where banks that were doing foreclosures, admitted that some of the time notaries were not present when the court documents were signed and that the signers relied upon others to review the file instead of doing it themselves.

The original freeze by a few banks was for 23 states that require a judicial foreclosure. However, this is an election year so everything becomes melodramatic and blown out of proportion; thus, the 50 state freeze. It is important that laws be followed, but the politicization of this is going to do great damage. The core issue is that borrowers didn’t make their payments and as a result are losing their house. The harder we make it for lenders to remedy the situation, the more difficult (and expensive) it will be in the future to get a loan on a house.

The biggest problem we have right now is short-term thinking. The leaders of this great country can’t think beyond November 2^{nd} and the impact will last for years.

## Calculator Problem – 2010-09-27

You purchase a mobile home for $2000, then sell it on terms for payments of $150 for 48 months. What is your return?

(The answer will be posted with the new calculator problem in 2 weeks. Or if you can’t wait that long, you can go to http://www.facebook.com/pages/Gary-Johnston-Seminars/111368472221424 for the answer.)

Answer to 2010-09-13 problem:

N=22.01 (I=14.99, PV=6700, PMT= -350, FV=0)

## Foreclosures

A good article on the current state of foreclosures. We still have a ways to go; however, the window won’t be open forever.

http://news.yahoo.com/s/ap/20100916/ap_on_bi_ge/us_foreclosure_rates

“Lenders took back more homes in August than in any month since the start of the U.S. mortgage crisis.”

“August makes the ninth month in a row that the pace of homes lost to foreclosure has increased on an annual basis.”

“That’s one reason** fewer than one-third of homes repossessed by lenders are on the market**, said Rick Sharga, a senior vice president at RealtyTrac.”

## Calculator Problem – 2010-09-13

You have a credit card with an interest rate of 14.99% and a balance of $6700. If you paid $350 a month, how long would it take you to pay off your credit card?

(The answer will be posted with the new calculator problem in 2 weeks. Or if you can’t wait that long, you can go to http://www.facebook.com/pages/Gary-Johnston-Seminars/111368472221424 for the answer.)

To find the answer to the 2010-08-30 calculator problem, we first need to find the future value of our $30,000 which is FV=1,584,825.92 (N=240, I=20, PV= -30,000, PMT=-0). If we borrow another $30,000 and invest at 20% but pay 10%, we would net $250 a month ($30,000 * 10% = $3000 / 12 months). If we add that $250 every month to the calculation, we would get FV=2,362,238.88 (N=240, I=20, PV= -30,000, PMT= -250). Now that we future value, we can calculate the yield on our original investment. I=22.30 (N=240, PV= -30,000, PMT=0, FV=2,362,238.88). 22.30% on our original investment.

## Calculator Problem – 2010-08-30

You invest $30k at 20% for 20 years. What is the future value using monthly compounding? If you then borrowed another $30k to invest in the same 20% investment and agreed to pay the lender 10%, interest only, on a monthly basis for the same 20 years and invest the increased cash flow from the borrowed money back into the same investment, how much would you have at the end of 20 years? What would be the return on your initial $30k?

The answer to the 2010-08-16 calculator problem is I=17.27% (N=60, PV= -16,000, PMT= 400, FV=0)

## Calculator Problem – 2010-08-16

If you paid $16,000 for an investment that gerenated $400 a month for 5 years, what would be your yield?

The answer to the 2010-08-02 calculator problem is FV=$349,748.12

(N=180, I=12, PV= -50,000, PMT= -100)

## Will Smith

Below is a link to a great article on Will Smith and his family that is worth taking the time to read. There are so many great thoughts and lessons in this article.

http://www.oprah.com/oprahshow/Will-Smith-and-Jada-Pinkett-Smith-Talk-Family

## Calculator Problem 2010-08-02

If you start with $50,000.00 and add $100 every month for 15 years in an investment at 12%, how much money would you have at the end of 15 years?

The answer to the 2010-07-18 calculator problem is FV = $1,034,344.05 (N=480, I=10, PV= -19,261.29, PMT=0)