Monday, October 20, 2008


My opinion of the Dutch's government's injection of over 13 billion into ING, expressed in my post last night, is being confirmed with a large rally in both the common and preferred shares.  INZ is up about 12% today.

I mentioned in a prior post that my yield on the 50 shares of INZ bought at 7.84 would be 22.9% annually (see prior post,  Some Nibbles Got Filled: JZE, PJS, INZ and FAX)  This is calculated by taking two figures, the coupon of 7.2% and the par value of $25, multiplying the par value by the coupon, and that gives you the annual interest payment due from ING ($25 x .072=$1.8 per year per 1 share)   To find out my yield at a $7.84 cost, I simply divide $1.8 in annual interest by my per share cost of $7.84 which gives me 22.9% annualized paid in quarterly installments.

I want to take it one step further and figure our how quickly my money will double at that return. One quick calculation is to divide the number 72 by the yield of 22.9 which would give me an approximation of how quickly it would double and the answer is 3.144 years.  This is not an exact answer so here is a link to a web site that has a calculator.The Rule of 72 (with calculator)  The correct answer is close to the estimate at 3.36 years.  

Use the rule of 114 to estimate the amount of time it would take to triple the money and the Rule of 144 to determine an approximate time to quadruple the money at a fixed rate of return.  (for my INZ at 22.9%, divide 144 by 22.9=6.28 years).  Now, this is not free money, for there is always risk in owning preferred shares in any company as witnessed by the recent events with the Lehman, Fannie and Freddie preferred issues, but this kind of return does give me a powerful incentive to hang onto the shares. 

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