Originally posted by: PAB
Originally posted by: yuchai
Not sure how everybody is getting ~7% as well. I agree with the ~12% number.
With a 7.35% growth, I got a total of $173K for his accounts.
Total gain - total invested = Gains/14 years = annualized rate of return.
Actually we were both wrong. The right return rate is 9.3% annual. I forgot to continue to accrue interest on the 401K even after he stopped contributing.
Your method isn't correct either. He did not have the 'total invested' for the entire length of the loan. He made 'deposits' into his funds that
eventually totaled the $116,000 he had at the end of his deposits (not including profits).
Here's a breakdown for how the 9.3% interest actually calculates:
.............[..................401K...................].................[.................ROTH.................]
YEAR.....BEGIN...INTEREST....END.................BEGIN....INTEREST....END
1995.......10000........930.......10930
1996.......20930......1946.......22876
1997.......32876......3058.......35934
1998.......45934......4272.......50206
1999.......60206......5599.......65805.................2000........186........2186
2000.......75805......7050.......82855.................4186........389........4575
2001.......92855......8636.....101490.................6575........612........7187
2002.....111490.....10369.....121859.................9187........854......10041
2003.....131859.....12263.....144122...............12041......1120......13161
2004.....154122.....14333.....168455...............15161......1410......16571
2005*...168455.....15666.....184122...............18571......1727......20298
2006*...184122.....17123.....
201245..............22298......2074.....
24372
* In 2005 and 2006, even though he is not adding funds to his 401K, it is still accruing interest.