1. Tuesday, November 2, 2010 - 7:55 PM

Thank you for a thought-provoking exercise.

From a mechanical perspective, the cascade works as you wish provided the relationship among the monthly contribution amounts for the 5 CDs is as follows:

Monthly contribution amount for 18 month CD: A

Monthly contribution amount for 12 month CD: 2A

Monthly contribution amount for 24 month CD: .6A

Monthly contribution amount for 30 month CD: .4A

Monthly contribution amount for 36 month CD: 2A

So, if you have an 18 month installment CD with installments of $1000, a 12-mo with installments of 2000, a 24-month with installments of 600, a 30-month w installments of 400 and a 36-month with installments of 2000, everything works out as you have outlined. Your total outlay over the first 12 months would be 72000 and from then on the cascade would take over.

As far as the use of installment CDs, my only reservation would be that their rate typically looks good, but works out to be about ½ what is stated, since the money is deposited in installments. Ken had an interesting discussion on this some time ago, which you may want to consider if you haven’t already done so.

I would be interested to know what you decide – and of course if you have found great rates on installment CDs please share!

From a mechanical perspective, the cascade works as you wish provided the relationship among the monthly contribution amounts for the 5 CDs is as follows:

Monthly contribution amount for 18 month CD: A

Monthly contribution amount for 12 month CD: 2A

Monthly contribution amount for 24 month CD: .6A

Monthly contribution amount for 30 month CD: .4A

Monthly contribution amount for 36 month CD: 2A

So, if you have an 18 month installment CD with installments of $1000, a 12-mo with installments of 2000, a 24-month with installments of 600, a 30-month w installments of 400 and a 36-month with installments of 2000, everything works out as you have outlined. Your total outlay over the first 12 months would be 72000 and from then on the cascade would take over.

As far as the use of installment CDs, my only reservation would be that their rate typically looks good, but works out to be about ½ what is stated, since the money is deposited in installments. Ken had an interesting discussion on this some time ago, which you may want to consider if you haven’t already done so.

I would be interested to know what you decide – and of course if you have found great rates on installment CDs please share!

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