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Todd,
If rates are about to rise 1.84%, from the current 5.30% that they are currently at. What amount are they going to increase to?
I ask because many publications print an answer that is 7.14% but I don't see that as correct because the first line would have to say an increase of 184 basis points for that to be correct. My answer to this is about 5.4%. Am I thinking correctly?
Yes; an increase of 1.84 PERCENTAGE POINTS would bring the rate of 5.30% to 5.30 + 1.84% = 7.14%, while an increase of 1.84% would bring a rate of 5.30% to 5.30x1.0184 = 5.39752%.
Note that:
- Most people get it wrong; even the canadian prime minister talked
about bringing down the federal sales tax by 1 persent, when he talked
about bringing it down from the current 7% to 6%. This leads to much
confusion, when we say that the unemployment rate of 8% dropped by
2% since the beginning of the year, what do we mean?
- Most people don't even know how to start when it comes to doing the
calculations you did above.
secondly, if rates are about to move to 7.14\% from 5.3\% what percentage move is this?
I get an answer of about 35\%. am I off on this or is everyone else that I ask not calculating correctly?
7.14 - 5.3 = 1.84, 1.84/5.3 = .347, so the decrease is about 35% of 5.3, and 1.84/7.14 = .257, so the decrease is about 26% of 7.14. So, should we call this a decrease of 26% or of 35%? As you can well imagine, this is another source of confusion when using percentages.
Claude
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