Some of the biggest high interest rate investments aren't financial products, as you may expect. Instead, they are material objects. Imagine the person who sells an old baseball card they've had since childhood for hundreds of thousands of dollars or the lucky antique "investor" who buys a bowl at a charity shop for little or nothing and then sells it to a collector for thousands.
These lucky finds can yield a lot of interest, but for many people calculating the interest can be tricky. If you have sold anything or are thinking about selling anything, here's how to calculate the interest:
1. Figure out your profit
Before you can figure out your interest levels, you need to calculate how much profit you have earned. Simply, take the amount that you paid for the item originally and subtract that figure from the amount for which you sold the item.
For example, if you sold a dollar baseball card for $100, your profit is $99.
2. Divide profit by number of years for yearly interest estimate
If you only want an estimate of the interest you earned, you can calculate that easily. First, however, you need to consider how long you had the item before you sold it. Essentially, that was the amount of time it took your item to accrue its interest.
Continuing from the example above, if you owned the baseball card for 33 years, you divide the number 99 by 33. The result is 3, indicating that your card earned an average of $3 per year in interest.
3. Calculate your simple interest using a formula
If you are not satisfied with a dollar amount as your interest estimate, there is a mathematical formula you can use to calculate simple interest rates. To use it, you need to know the original price of your item, the price you sold it for, and the number of years involved.
In the formula, those numbers are arranged like so: r = ( SP / OP )1/n - 1
In this equation, r equals interest rate, SP equals selling price, OP equals original price and n equals the number of years you had the item. Therefore, with the numbers from the baseball card example, your equation would change to r = ( 99 / 1 )1/33 - 1
To solve this high interest investment problem, first figure out your exponent. One divided by 33 is .03. Then figure out the number in parentheses – in this case, 99 divided by 1 is 99.
You need a calculator for the next step. To calculate your interest, you need to first enter 99. Then, hit the exponent button (on most calculators, it appears as an x with a small y in the exponent position) and follow it with .03. The answer is 1.148.
Finally, when you subtract 1 from that number, you end up with .148. To convert that to a percentage, just pop the decimal over two places. Now, you finally have your interest rate – 14.8 percent.
Whether you are selling old furniture on the internet, collectors items or even gold, you can use this formula to figure out how much interest you have earned on your investment.