User talk:Gregalton

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Contents 1 Demand Response 2 Hi 3 Compound Interest 4 Commercial/Blogs -- sorry 5 International Finance Corporation link 6 Return of capital 7 Article clean-up 8 Fisher Equation 9 Interest Page 10 Universal health care 11 P/E Ratio

[edit] Demand Response

Thanks for your edits on this page. I've been monitoring the page because it has been attracting the interest of spammers - would you like to take over the task? All it requires is watching the page and then reverting edits when various companies add sections titled "leading vendors" etc. Cheers --Saganaki- 08:46, 2 November 2006 (UTC)

[edit] Hi

Hi Greg, I've enjoyed talking to you....you may have noticed I am quite new to Wikipedia....hope I am not appearing too brash or treading on to many people's toes!

kind regards

Dave Andrews

[edit] Compound Interest

You said "In Canada, mortgages have traditionally used semi-annual compounding, while payments may be monthly (most commonly), twice-monthly or every two weeks." What happens if the monthly payment is not made? Are you saying that the unpaid interest does NOT bump up the principal on which the subsequent interest is calculated?Retail Investor 00:33, 5 January 2007 (UTC)

(I hope this is the right way to reply)

Good question. No, of course, it does bump up the principal. How about this thought experiment: for continual compounding, what if the payment is not made continuously? I only mean this rhetorically. The fact is, the payment period and the compounding period do not need to coincide at all; the compounding period is a convention. I hope I express this properly, and I do not do this on a day to day basis, but my understanding is:

The compounding per se is on a six month basis, but can be calculated at any time.

So, if you are late three days (and no grace period, etc), the amount payable is added to principal for this period of time. If you ask the bank (and their systems are up to date), you can determine new principal, which is old principal plus payment amount plus accumulated interest to that day.

If you pay on the third day, you will have interest payable on the original principal plus the delayed payment for three days at the six-month compound rate (expressed as a fraction of days / six months).

In fact, this is basically identical to interest on a given sum for x% annual interest for y days. You would pay interest of principal times x% times y/365. It just doesn't get compounded for the interim days (for example, on a daily basis).

Why six months, etc? I have no idea. That was the convention a long time ago and it has stuck, and I think at one point "they" chose to require banks etc to all quote and calculate on the same basis, rather like an APR.

The point being any rate/compounding period can be chosen, the calculations are just extra work often dictated by convention/regulation. Hope this is clear.--Gregalton 04:49, 5 January 2007 (UTC)

I never said "the compounding period has to be the same as the payment period". Nor is the issue 'interest expense for a few days'. My bank ignores all early/late payments and only posts them at the month end.

I know from when I held a mortgage that each month's interest was calculated on the principle o/s at the beginning of the month. I overpaid every month, and the payments always reduced the principal on which the next month's interest was calculated. Therefor it was compounded monthly. The interest rate applied to the principle was the quoted rate/12. This means that Canada's convention is the same as the US's.

As proof, ask "Why would anyone make the first five months' payments, if it only compounded at the six month point? If there is no benefit from the payment (principle reduced for calc of next month's interest) and no punishment for non-payment (principal increased by the unpaid interest), no one in their right mind would make the interim five month's payments.

You say "of course it (any unpaid interest due) does bump up the principal". Well that is what compounding is. If it is added monthly, then it is compounded monthly.Retail Investor 22:34, 5 January 2007 (UTC)

I am reverting to the text, and will put a reference. This is the conventional way of doing it in Canada. The question is not whether or not you get interest penalty or benefit for late/early payment (you do) but whether you get the penalty or benefit of interest on interest (compounding). See the footnote at [1], where it reads "1 Interest is compounded semi-annually not in advance. The interest rate is fixed for the term of the mortgage. The interest rate is usually renegotiated at the end of the term of the mortgage." Since CMHC (arguably) sets some of the basic standards for the mortgage industry, this seems to meet the test of conventionality. Whether your mortgage had this feature or not does not seem to be the issue.--Gregalton 01:42, 11 January 2007 (UTC)

I should note that I apologize if I have not explained well how semi-annual compounding works. Nonetheless, this is one of the classic examples of different compounding periods I was taught in graduate school, and one of my HP calculators came with an example of how to calculate Canadian mortgages in the manual. Finally, if you do a google search for "Canadian mortgage semi-annual" you get many, many hits, including some with the unequivocal statement that "All Canadian mortgages use semi-annual compounding of interest." See [2] at citizen's bank of Canada, for example. I do not know whether this is indeed true for all mortgages, and if so, whether this is due to a law or bank regulation, but it seems clear that this is indeed the conventional way mortgages are calculated in Canada.--Gregalton 02:17, 11 January 2007 (UTC)

None of your references showed the math or the results of the math. I learned long ago to ignore what is said about interest rates, and do the math myself. Since you dismiss my personal reality here is public proof. Use the tool at [3] >>Mortgage Payment Calculator at right. Input

 Principal 50,000
 interest 5%
 term 10 yrs

Their results show $529 for monthly payments. Now check this using the equations at time value of money or your own calculator. Input

 PV 50,000
 i = 5/12
 n = 10*12

The results I get are $530, proving monthly compounding was used.Retail Investor 02:29, 14 January 2007 (UTC)

I get two different results with a quick check, 529.07 and 530.32, which seems to imply that something went wrong with the proof above. The difference between the two is not large, of course, and less when numbers are small; try different ones to see more results. In the meantime I will try to dig up the full formula for your reference. And there was no attempt to dismiss your personal reality.--Gregalton 17:00, 14 January 2007 (UTC)

Condescending will not change the fact that I have proved you wrong 8 ways.

1. If you don't know the equation to use, you should not be deleting other people's work. The formula for PVA are detailed at time value of money, as I have already said, so don't bother "digging up for my reference".
2. The fact that you could not prove me wrong does NOT imply "something wrong with the proof". It means you are wrong.
3. I purposely did not give the inputs for a six-month compounding, just to see if you would know how to do it. If you did, you would have detailed it above.
4. You will not be able to find, anywhere, a spreadsheet for a mtg amortization, used by anyone, that does not have exactly the same line copied down, for every single payment. If you were correct, there would be a different calculation in every sixth line.
5. You have not been able to answer the obvious question that proves you wrong. "Why would anyone make the first five months' payments, if it only compounded at the six month point?". Everyone would wait to make all the payments the day before the six month point.
6. You should have seen, without my pointing it out to you, in the web-calculator's answer page, that the compounding period for the (eg)weekly pay mortgages, is weekly, etc. for all the other periods.
7. You should understand that if indeed mortgages are compounded six-monthly, regardless of payment period, then all the quick-pay options now available, would not result in any savings at all, because the principle paydowns would not compound until the six-month point.
8. Your edit of the page to define compounding as "interest on interest' is wrong. Interest is never calculated on interest - only the principle. The whole point of compounding is that unpaid interest is added to the principle.

You should go back to the page and delete your changes. They are wrong. Claiming higher education instead of being able to prove simple math impresses no one. Retail Investor 17:32, 14 January 2007 (UTC)

I did not intend to condescend, and I'll try again to explain.

1. Your proof gives different results. The calculator you referenced (which uses semi-annual compounding, even though it does not specify which type) gives $529.08 as the answer as mentioned. The calculation using monthly compounding gives $530.33 (from straight application of the annuity formula using monthly interest). Try the calculator on http://www.lendingmax.ca/calculator.php which specifies the type of compounding being used, and you can compare the effect on the payment between the two types of compounding. Since your proof seems to be based on the two numbers being the same and it gives different results, it would not appear to be a valid proof. Have I missed something in your argument?
2. Regarding why you would make early payments under semi-annual compounding: you would still save interest. You would save less than under shorter compounding periods, because there is no compounding within the semi-annual period. The difference would not be large, however. This is why quick-pay mortgages exist, and this is not changed by semi-annual compounding. I must not understand your question.
3. I did not and do not see the reference on the web-calculators answer page you refer to. Probably my oversight, but I don't see it.
4. When I said I would search for the formula, it is because I am travelling and do not have my reference materials. No attempt to impress or rely on reference to higher education, but rather to note that this is a fairly well known feature of Canadian mortgages. On the contrary, I have shown web references that state clearly that this is a convention in Canada.
5. The "deletion" (if I understand what you are referring to) was a change by me about the issue at hand - whether or not Canadian morgages conventionally use semi-annual compounding - subsequently deleted by you, and changed back by me when documented.
6. I disagree about "interest on interest" - I think it is an entirely apt description. As you state above "The whole point of compounding is that unpaid interest is added to the principle"; to carry this further, the compounding comes when interest is charged on the new principal - i.e., interest on interest. To cite a third party, see [4], where compound interest is defined: "Interest computed on the accumulated unpaid interest as well as on the original principal." I have bolded for emphasis: interest on interest.
7. Once again, I will endeavour to track down more documentation on how the calculations are done for semi-annual compounding and monthly payments, it is a little arcane.--Gregalton 01:14, 15 January 2007 (UTC)

For an additional reference: Excel instructions (a little dated) on how to deal with the semi-annual compounding (towards the bottom): [5]. "For example, in Canada, the nominal interest rate would be applied semi-annually to the example above, although it would still be described as a loan at 10.00%. ... This difference results in slightly lower interest costs for the borrower in the Canadian situation, and illustrates the importance of knowing the financial environment in which you are using the worksheet functions." More detail on the page. Hope this helps.--Gregalton 01:46, 15 January 2007 (UTC)

Perhaps a better link, "A Guide to Mortgage Interest Calculations in Canada", [6], with more conceptual info and some spreadsheets including amortization tables and the like.--Gregalton 02:13, 15 January 2007 (UTC)

And final page in the linkfest, the manual for the HP 17BII financial calculator: see page 185, "Canadian Mortgages" [7]. "In Canadian mortgages, the compounding and payment periods are not the same. Interest is compounded semi-annually while payments are made monthly." Instructions on how to calculate follow.--Gregalton 02:50, 15 January 2007 (UTC)

[edit] Commercial/Blogs -- sorry

I did not mean to trash your work by including online references that seemed to me to give some good historical information on interest and money. I didn't realize that they're commercial or blogs. I'll see if I can find the same info in printed references.

Here's something you might want to consider including:

at http://www.citigroup.com/citigroup/corporate/history/citibank.htm, there's a note saying: 1921 -- National City was the first major U.S. bank to offer compound interest on savings accounts.

To the best of my understanding, simple interest is a contract to pay a percentage of the principal after a period of time. Compound interest is a situation where the interest is periodically added to the principal, then interest is paid both on the original principal and the accrued interest.

To the best of my understanding, compound interest is not accepted as a world-wide "norm". It's been common in business transactions between certain countries for many years, but some countries don't accept that "norm" if it's not stipulated in the loan contract.

For the average reader, you might want to mention where the idea of "interest" came from. Many people don't understand that money depreciates in value over time, and that there is inherent risk [potential loss of capital] in lending money -- so lenders must ask for interest on the money. I think it's important to present both the lender and the borrower's perspective on this topic. And I think that if you present both views, you'll find that both lenders and borrowers gain from the trade in cash.

Again, very sorry I interfered with your work and hope it goes well!

SueHay 03:27, 21 January 2007 (UTC)

Please, don't worry - I didn't consider this trashing the page and it is not, at any rate, "mine". In this case, I simply thought the text did not have much to do with interest per se. It also seemed to me that the source was perhaps not sufficiently reliable, but that is just an opinion. As for other suggestions, please go ahead and be bold and edit.

That said, I disagree about compound interest - it is the norm as far as I am aware, and I haven't seen any references to the contrary. You may want to see the interest page, there is more background there I believe.--Gregalton 12:29, 26 January 2007 (UTC)

[edit] International Finance Corporation link

Sorry about my over zealousness with the doingbusiness link. It's been a tricky one to sort out the appropriate from the not and I must have been losing my grip on that page. Thanks for reverting. -- Siobhan Hansa 16:21, 28 January 2007 (UTC)

Given the linkspam fever, completely understandable. My thanks to all willing to devote effort to eradicating these, and occasionally getting a good one while cleaning house may be an unavoidable risk. Hopefully the good ones will also get put back.--Gregalton 16:28, 28 January 2007 (UTC)

I just took it out again but mainly because it was broken so I couldn't check it. Did you mis-type the URL or something? --BozMo talk 21:48, 28 January 2007 (UTC)

[edit] Return of capital

I was editing this page to answer your question and saw that you had previously edited it. It is clear from your question that you don't understand the basics of distributions, so please don't edit the page. Contributors want to help you, but not to undo what is posted in error. Thanks.209.53.181.55 02:14, 31 January 2007 (UTC)

Not a constructive comment from anyone, let alone an anonymous poster. If you would like to disagree with edits based on substance, or to answer a reasonable question posted in good faith, please do so, rather than throwing accusations of lack of understanding. And keep your ill-mannered "advice" to yourself.--Gregalton 03:26, 31 January 2007 (UTC)

Jumpin! I've just been going through the book you two have produced at compound interest. Why are you being so obstinate? You were proven wrong about mortgage compounding. (They compound monthly, etc). And you are now wrong about the quoted rates. (They are simple interest). Read the exampleA on the page itself to learn how simple interest must be translated. You have ABSOLUTELY no right to be editing any page when you don't know even the basics.

The reason Canadian rates include the asterick and footnote is to warn you that the rate they are giving is not the 'real' rate, but only simple interest. A 12% mortgage is really 1% applied each month. When you do the math, you find the compound rate is far higher.

 1*(1.01)(1.01)etc 12 times, less 1

For a Canadian mortgage the rate is

 1*(1.06)(1.06)-1

209.53.181.55 02:48, 31 January 2007 (UTC)

Strange, you sound like someone else. I disagree with both your points. Simple interest is, by definition, not compound interest - have you tried googling this phrase? "Simple" interest for an amortizing mortgage is nonsense. If there is an example of a Canadian or US bank quoting a rate as "simple interest", I have yet to see it.

When you are quoted a rate in Canada, you are quoted the semi-annual compounding rate. On an annual compounding basis, the equivalent effective rate would be higher. On a monthly compounding basis, lower. And without going into the details, the only way one could be certain of what the "actual" compounding period used is by checking the bank's internal procedures. Even if this is too subtle or esoteric a point, the fact that every Cdn bank, etc., refers to this as semi-annual compounding should be sufficient to understand this is the correct terminology (even if you disagree about what it means). Or to quote from yet another bank site (royalbank, feel free to check): "Interest rate compounded half-yearly, not in advance" (fixed rate mortgage). "Interest rate is compounded monthly, not in advance." (Variable rate mortgage). Even if you and your compatriots don't find my explanation sufficient or convincing, it would be worthwhile to attempt to explain why everyone else uses this terminology. And you'll note the bank's page does not say compounded monthly at an equivalent rate, a formulation I'm okay with since it is functionally equivalent - they say compounded half-yearly / semi-annually.

And I will ignore your comments about what I do and do not have the right to do.--Gregalton 03:26, 31 January 2007 (UTC)

If you need another reference in plain language about Canadian mortgages, see [8]. The lead sentence in the section on Canadian mortgages is "In Canadian mortgages, the compounding and payment periods are not the same. Interest is compounded semi-annually while payments are made monthly." This is all I have been saying, and it seems pretty straightforward and uncontroversial.--Gregalton 03:51, 31 January 2007 (UTC)

[edit] Article clean-up

Hello. I just wanted to say how much I appreciate your work in removing inappropriate external links and cleaning up the various financial articles. I thought this edit was a particularly good catch. As an active member of WikiProject Spam, many of those articles are on my watchlist as frequent targets of linkspam, and I've noticed your name popping up with consistently good edits. Anyway, thanks again, and don't hesitate to contact me if you need some help with anything at all. Have a good one, Satori Son 14:44, 31 January 2007 (UTC)

Thanks for the kind words. I'll do what I can while I have a bit more free time than usual. And from what I can tell, you are fighting the good fight yourself. It's really remarkable how persistent some of these linkspammers are. Is there a tool to identify a site automatically as a common linkspam target/source?--Gregalton 15:07, 31 January 2007 (UTC)

You're very welcome!

As far as identifying linkspam target articles, there are some decent suggestions at the WikiProject Spam main page, but the corresponding discussion page at WT:WPSPAM is where the real action is. There's also the Special:Recentchangeslinked/Category:Wikipedia spam cleanup page, which shows current activity on articles that have been tagged with {{Cleanup-spam}}. I can always catch a few there.

Identifying the links themselves can be a little tougher. ReyBrujo has a great list at User:ReyBrujo/Base/Tasks, GraemeL's got one at User:GraemeL/Watchlist, and A.B. has some notes and sites at User:A. B./Sandbox. Those three users, and several others, are absolutely top notch spam fighters; I'm basically an amateur who dabbles in it among my other interests here.

Anyway, hope that helps. Keep up the great work! -- Satori Son 15:53, 31 January 2007 (UTC)

[edit] Fisher Equation

I don't know if this is helpful or not, but you might want to look at Fisher equation. Nominal rate of interest appears to be primarily an inflation-adjusted rate:

• Nominal Interest Rate= Real interest Rate + Expected Inflation Rate

I believe that "real interest rate" in this equation is the discount rate (present value of expected returns). I've checked a couple of finance books on this, and it looks as if the "real interest rate" and "discount rate" are calculated annual yields based on capital appreciation, dividends or interest. The nominal rate seems to be an inflation adjustment.

(And many thanks for the note you left me! I figured I must've put it where you couldn't find it, and that's why you didn't answer. And that article that lacked references and Wiki formatting was pretty obvious. If you find I place edit or reference tags on something you've worked on, please don't take it personally. Edit and reference tags help make articles better. Anyone who gets huffy about justifiable edit and reference tags should bone-up on basic editing skills. I've had to bone-up a couple of times already on my own writing. It's good for the soul :)) )

SueHay 01:28, 16 February 2007 (UTC)

Thanks, I'll look forward to those tags showing up... Nominal as the rate un-adjusted for inflation is definitely one sense, and it is covered in that article (primarily by linking to another article that goes into much more depth). But there is another sense that is by no means obscure: [9], [10], [11], [12], etc. The latter one has the "Fisher" definition at the top, but below (where it starts "effective interest rates" says "To convert a nominal rate to an equivalent effective rate: Effective Rate = (1 + (i / n))^n - 1;

Where:

i = Nominal or stated interest rate

n = Number of compounding periods per year

Example: What effective rate will a stated annual rate of 6% yield when compounded semiannually?"

My view is that both senses need to be shown (and that nominal/real relationship is well shown on the real interest rate page). If there is another approach that would cover this off well (between the various articles, I mean) to provide some consistency between them, I'd be happy to consider.--Gregalton 03:15, 16 February 2007 (UTC)

I looked at those examples you gave and checked my books again. I'd misunderstood the use of "real interest rate." It's a theoretical concept, not something that applies in finance. My Barron's Finance says, "The interest rates we see quoted in newspapers and other publications are called nominal rates." Those examples you gave support that. I hadn't seen the wikipage on "real interest rate", and it might help the average wiki user if "real interest rate" was clearly categorized into economic theories. It's awfully easy to mistake it for an annual percentage rate or annual yield as used by banks and mortgage companies. What do you think? SueHay 13:57, 16 February 2007 (UTC)

[edit] Interest Page

Gregalton, someone just tagged the Interest page Interest:talk for the Business & Econ Project. Didn't know if you'd noticed, and I saw you've been watching over that page, so I thought I'd give you a heads-up. Might be some edits coming soon. SueHay 01:43, 18 February 2007 (UTC)

[edit] Universal health care

[13] Now that's a lot better. Nbauman 17:54, 20 March 2007 (UTC)

[edit] P/E Ratio

I believe your comment about "justifying" certain links on the P/E Ratio page was directed to me; I just figured that two pages of original content that showed some problems with using P/E was probably a good idea, because most people familiar with investing realize the market cap and net income don't really tell you anything about a company. Considering there is no section on EV/FCF, I think my links are especially relevant. I'm not sure why my page was considered spam, as I don't sell anything or even require registration... hope to hear a ruling on this, but whatever. :-? —The preceding unsigned comment was added by 136.167.184.32 (talk) 03:23, 21 March 2007 (UTC).

Who's "me"? If you sign in, we'll know who you are. Otherwise, we can't tell you apart from anyone else using your ISP address. If you want to stand up for what you believe, sign up with a username on Wikipedia. --SueHay 03:56, 21 March 2007 (UTC)

I'm in no position to make a "ruling", but here's why I removed it and why it will likely get removed by others if it's put back (because it looks and smells like linkspam). i) Prominent advertising is a sign that flags linkspam; not 100% correlation but likely. ii) Numerous conflicts with WP:EL (e.g. keep links to minimum, don't link to multiple pages at same site, etc). Finally, I didn't find the content compelling enough to overlook the other stuff; or, more specifically, the content is not authoritative/sourced to justify inclusion. Even easier than linking here would be simply incorporating any material you found sufficiently interesting to rephrase. And, as Sue notes above, signing in with a proper log-in name would help; most linkspam comes from numbered addresses, and will be given more benefit of the doubt coming from a signed-in user.--Gregalton 06:07, 21 March 2007 (UTC)

@Sue: There isn't really anything here for me to "stand up" for, and I don't see the point of registering because I'm busy enough with my own things that I wouldn't be working on the entries here. Maybe I'm just not knowledgable in the workings of Wikipedia though...

@Greg: I thought my links were useful, apparently they weren't. I just wanted to respond so whoever edits this page doesn't think the links just came from some random spammer. That's all, have a great day. :-)