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Finally, this was the return on a six month period. Annualized, that rate of return would be 21.14%. In other words, this is a better deal than depositing $100 per month for 6 months in a savings account that promises an APY of 20%.
Only three things wrong there.If you are depositing $100 every two weeks thats equivalent to $216.66 per month. If you were depositing that money into an account with an APR of 20.00% your account balance would look like this:
month 1 = 220.27
month 2 = 444.21
month 3 = 671.88
month 4 = 903.34
month 5 = 1138.66
month 6 = 1377.90
If you carry out the year it looks like this:
Wellllll...NO.
It might work differently on the SKYW side of the house. Although the ASA version does allow you to 'change' the % (and therefore, cancel contributions) at any time, the changes will only take affect at the purchase time, either 1 Jan or 1 July. So even though you can request the change through 'Computershare' (something tells me this was the lowest cost provider of this service...) at any time, the change will not be made until the end of the 6 month period.
The changes will not touch any amount purchased during the 1 July 08/1 Jan 09 time frame. However, the 1 Jan 09/1 July 09 time frame will now be limited to only a 5% discount from the closing share price at the end of the period.
The value to the ASA/SKYW employee has been dramatically reduced.
You are absolutely right. Please disregard my uninformed drivel. I am in the presence of financial genii.Andy, your calculations are indeed incorrect, or at best-misleading......
5% discount is a 5% discount... It does not matter when it takes place. You are calculating this as though the return is additive, but it is not. You get 5% return for the first six months and a separate 5% return on the second six months-these are separate accounts.
These accounts are not co-mingled, so they are not addative-the second 5% DOES NOT piggback on the first 5%. It starts all over.
You are mis-applying the concept of "dollar-cost-averaging," in effect-you are compounding the 5% a few times more than it actually can be.