How is real calculated. Invest, don't spend! how to calculate the real cost of things and accessories. What is real wages and how is it determined?
The level of the real exchange rate (hereinafter RER), which is used in practical calculations, affects many factors. This characteristic affects the investment attractiveness of the country, the standard of living of citizens, the economic and social sphere. An overestimated indicator has a negative impact on the growth rate of the state economy. In turn, RVC is also influenced by several factors. Among them are:
- inflation rates;
- the purchasing power of the national currency;
- profitability of securities used in the international market;
- the health of the state's economy, the stability of the political system;
- business activity, demand and supply of currency;
- the volume of use of the national currency in international settlements;
- sanctions and embargoes.
Rising inflation causes the depreciation of the national currency. Because of this negative process, its nominal price will change and, as a result, the real one. The change in the real exchange rate is influenced by business activity in the country. If the climate for businessmen is not favorable, then new investors will not come to the market, which means that a negative change in characteristics will not have to wait long.
RVC is influenced by 3 groups of factors. Economic, political and force majeure. Force majeure includes natural and man-made disasters, cataclysms. The stock market also influences the exchange rate. Its activity forces investors to exchange foreign currency, to make reverse operations. Statements by politicians, important speeches by members of the government, a change in the leadership of the country are indicators that affect the exchange rate. It can also “suffer” due to the imposed sanctions against individual enterprises, businessmen or countries.
Features of calculating the real exchange rate
The calculation of the real exchange rate is carried out according to the general formula. It is calculated on the basis of nominal data, taking into account changes in the price level in the country and in the state in whose currency the national currency is valued. The calculation formula looks like this:
Er is the real exchange rate; En is the nominal VC; Pf is the price index of a foreign state; Pd is the price index of your country. The resulting value reflects the level of investment attractiveness, the competitiveness of domestic goods, and the well-being of the population. It characterizes the situation that is observed in the country. This is an informative value, the calculation of which must be carried out in a timely and reliable manner. Even experienced experts make mistakes in calculations. After all, the measurement of magnitude is based on baskets of consumer goods. Naturally, the quality of the products included in the basket varies greatly from country to country. The composition of the basket itself, which is used to calculate the price index, also varies.
Differences between real and nominal exchange rates
The nominal exchange rate is the exchange rate that operates in the state. For example, in Russia this value is set by the Central Bank. RVC displays the ratio of prices for goods of the two countries. Both values are indicators of the state of the exchange rate of the national currency. Unlike the nominal exchange rate, the real exchange rate is always a "floating" value. It is he who is used more often in everyday life, since the indicator reflects the purchasing power of the national currency. Having calculated the indicator, it becomes clear how many foreign goods can be bought for a certain amount of the national currency.
"If you buy an apartment with a mortgage, you will have to pay the bank three or even four of its cost" - this is perhaps the most common misconception in Russia regarding credit products.
Indeed, if you simply add up all payments on a home loan, then the amount is very serious. For example, if you bought an apartment for 3 million rubles. using a loan in the amount of 2.4 million (80% of the value of the object) for a period of 20 years at 12% per annum, then in the end you will pay 6.94 million rubles or 2.3 of its cost for housing. Including 0.6 million - this is the initial payment (20% of the cost of the object), and 6.34 million - payments against the loan for 20 years.
However, such calculations are correct only in conditions of complete isolation from real life. From the one in which there is inflation, rising prices for real estate, taxes and much more. To calculate the actual cost of an apartment, all these variables must be taken into account.
Inflation
In the loan agreement that you have concluded with the bank, the amount of the monthly payment is fixed - some specific amount. In the above example, the payment is 26.43 thousand rubles. per month. It remains unchanged throughout the life of the loan (loans with a floating rate occupy an insignificant market share, and we do not consider them). But while the loan is repaid, inflation continues to “gallop” in the country, therefore, the money paid on account of the loan is gradually becoming cheaper.
The Ministry of Economic Development of the Russian Federation has developed a forecast for the long-term socio-economic development of the Russian Federation, according to which inflation from 2013 to 2020 will fluctuate around 5% per year. Further, in 2021-2025, it will decrease to 3.5-3.9% per year. However, even after the preparation of this document, representatives of the ministry repeatedly spoke about the revision of the forecast values upwards. For example, in 2013 inflation, according to updated data, will be 6.2%, and in 2014 - 5.3%. In addition, the experience of many years shows that the real increase in prices almost always turns out to be higher than predicted by the government. So, for our calculations, we can safely take the inflation rate at an average level of 5% per year (for the next 15-20 years).
From all this it follows that in fact, loan payments will become cheaper annually by 5%. Therefore, if we calculate relative to the current value of the apartment (and money), then you will have to pay 3.87 million today's rubles * to pay off the mortgage loan (see footnote). This means that the total cost of the apartment (in today's rubles) will be 4.47 million. This amount included mortgage payments and a down payment - 0.6 million rubles.
As a result, it turns out that with a mortgage your apartment will cost you more than with a regular purchase, less than one and a half times.
But that's not all. It relies on interest on a housing loan - the budget will return to you 13% of the amount that you gave to the bank to pay off the interest rate on the loan (the tax deduction does not apply to paying off the "body" of the loan). You took out a loan in the amount of 2.4 million rubles, which means that interest payments amounted to 1.47 million (in today's rubles). The tax deduction from this amount will be 0.19 million rubles. Consequently, the total cost of the apartment (in today's rubles, taking into account the tax deduction) will be 4,28 million. In fact, this means that the mortgage increased the cost of the apartment not by 2.3 times (as we initially thought), but only by 40%.
Moreover, if you take a loan not for 20 years, but for a shorter period, and initially make more than 20% of the cost of housing, then the overpayment will be even less.
Price increase
The time has come to calculate the impact on the profitability/unprofitability of a mortgage transaction of the third factor - the dynamics of housing prices. Our previous studies show that apartments in Yekaterinburg over the past 12 years (since the beginning of the 21st century) have risen in price by an average of 17.6% per year. The average inflation rate in this period was 11% per year. It is easy to calculate that the rate of growth in housing prices, on average, outstripped inflation by 6.6% per year. But those paces are in the past. Most likely, in the coming decades, the Yekaterinburg real estate market will not grow so rapidly. However, one should not expect that the annual rise in the price of apartments in the capital of the Urals will equal the rate of inflation. Opinion polls show that up to 70% of the townspeople intend to improve their living conditions, plus the oilmen of Khanty-Mansi Autonomous Okrug and Yamalo-Nenets Autonomous Okrug are interested in buying housing in Yekaterinburg.
Analysts believe that the forecast looks quite realistic, according to which apartments in the city will rise in price at the rate of "inflation plus two percent per year." In our model for the next 20 years, this means an annual price increase of 7%. That is, housing bought today for 3 million will cost 11.6 million rubles in 20 years.**
However, we cannot use this number to calculate the real value of a mortgage deal. In the previous section, we calculated the cost of buying an apartment on credit in today's "expensive" rubles. And 11.6 million is the price of an apartment, expressed in cheaper (due to inflation) rubles of the 2033 model. To recalculate for expensive rubles, we will remove the inflation component from the final price of the object (5% per year). That is, our apartment will rise in price only by 2% per year. Even by 1.9% (after all, inflation also bites off its 5% annually from a two percent increase in prices). In this case, the cost of the apartment in 20 years will be 4.37 million (in today's expensive rubles).
Four paragraphs above, we calculated that 4.28 million were spent on the purchase of an apartment in terms of today's rubles and taking into account the tax deduction. In the bottom line, we have the following - if we take into account the time value of money and the dynamics of housing prices, then our borrower paid 4.28 million rubles. and became the owner of an apartment that costs 4.37 million. It turns out that even paying off a mortgage loan for 20 years, he will not overpay anything and even remain in a small plus (in the example under consideration - 90 thousand rubles). To some extent, we can say that this "bonus" will cover the borrower's costs for mortgage insurance.
Summary
In the considered example, the final price of a mortgage apartment almost coincided with the amount paid for it by the buyer (taking into account the time - the emphasis on the last syllable - the value of money). It happened so by accident. The author did not adjust the answer, but calculated an arbitrarily chosen option for buying inexpensive housing. With a different cost of the apartment and the amount of the loan, the results of "temporary" calculations will look different. But in any case, if you take into account the time value of money, it turns out that a mortgage is a pleasant enough thing from the point of view of the buyer.
And one moment. The model we built looks very "chocolate". However, it is worth considering that if in real life inflation turns out to be lower than in our model, or housing becomes more expensive at a lower rate, then the borrower will not be able to break even. In the absence of inflation and rising property prices (if they last 20 years), our hero will actually pay 2.3 of its value for an apartment.
* For absolute clarity, I will give a formula for calculating the cost of a mortgage loan, taking into account the time value of money. Every year, the ruble becomes cheaper by 5% due to inflation, therefore, every year the amount of payments must be multiplied by 0.95. The "asterisk" in the formula denotes the "multiply" sign. And one more thing: 317.16 (thousand rubles) is the amount of annual contributions to repay the loan. So…
317.16*0.95+317.16*0.95*0.95+317.16*0.95*0.95*0.95+317.16*0.95*0.95*0.95*0.95+
317.16*0.95*0.95*0.95*0.95*0.95+317.16*0.95*0.95*0.95*0.95*0.95*0.95+
317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95+317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95+
317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95+317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95+
317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95+317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95+
317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95+317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95+
317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95+317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95+
317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95+317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95+
317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95+
317.16*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95*0.95=3865.78949212923
** To calculate the cost of housing in 20 years, we used a standard financial (deposit) calculator that calculates annual interest on capitalization once a year. The calculator can be found on the Internet, for example, on the site www.bogache.ru
Olga doubts which deposit is more profitable: with a slightly higher rate, where interest is accrued at the end of the term, or one where the rate is lower, but interest is accrued and capitalized at the end of each month. How to calculate the real return on investment?
Director of the Department of Retail Segments and Marketing at UniCredit Bank Svetlana Pirozhkova
: “First, Olga needs to understand how a deposit with monthly interest capitalization differs from a deposit with interest paid at the end of the term. With monthly capitalization of interest, the amount of interest paid is added to the deposit amount, and this happens every time interest is paid, and the amount of interest paid will increase each time, since the amount of the deposit increases with each previous interest payment.
Deposits without capitalization bring income to the client in the amount of the stated annual interest rate. If we consider a deposit with monthly capitalization with a period of one year and a rate of 8.50% per annum, then a choice in favor of a deposit without monthly capitalization can only be made if the rate on it is more than 8.85%. In another case, the choice should be made in favor of a deposit with capitalization.
It is also worth making a choice towards deposits with capitalization for up to a year, as the client will see a monthly increase in his savings. If the deposit provides for a partial withdrawal, then the client will be able to use the interest paid during the deposit, and not at the end of the term.
Head of Personal Financial Planning Implementation at BCS Premier Sergey Deineka
: “Let's analyze the described situation on concrete examples. Suppose we have an amount of 500 thousand rubles. The interest rate on a deposit with accrual at the end of the term is 10% per annum, and on a deposit with monthly capitalization - 9.5% per annum. Consider different investment periods - six months, a year and two years.
The term is six months. In the first case (10% at the end of the term), the amount, including interest, will be 525,000 rubles, in the second - 524,200. The first option is more profitable.
The term is one year. In the first case, the amount will be 550,000 rubles, in the second - 549,700 rubles. The first option is still more profitable, but the results are already almost equal.
Finally, on the horizon of two years, we will receive 600,000 and 604,200 rubles, respectively. The second option is already more profitable here: the longer the term, the greater the impact of interest capitalization on the final result.
In order to calculate the real return on a deposit and not make mistakes in independent calculations, it is recommended to use a deposit calculator, which, as a rule, can be found on the bank's website or in open sources. Now the average deposit rates in Russia are at a high level, and investing money in a bank helps protect money from inflation. However, it is important to understand that this is a temporary phenomenon associated with an unstable situation in the economy and politics.
Banks are forced to raise rates, among other things, in order to increase their attractiveness against the backdrop of a negative information background: license revocations, sanctions. Nevertheless, even in the current situation, you can find financial instruments with which you can quickly increase your capital and achieve your goals than in the case of using only bank deposits - due to a higher expected return. Their role can be played, for example, by instruments of the securities market. Among them, you can find both options for investing with minimal risks and a return that exceeds the return on deposits (including in foreign currency), as well as more risky high-yield instruments.”
Bogdan Chekomasov, Director of the Retail Business Department at Bank Intesa
: “In order to understand which contribution is more profitable, it is necessary to compare the specific conditions of the two options. Deposits with monthly interest and capitalization often have a lower rate compared to classic deposits with interest at the end of the term. At the same time, it often turns out that the returns on two different types of deposits are almost identical to each other.
This can be easily seen in the following example: when opening a deposit in the amount of 300 thousand rubles for a period of one year at a rate of 9% per annum with interest paid at the end of the term, the income will be 27 thousand rubles. When opening a deposit for the same amount and term, but at a rate of 8.5% per annum and with monthly interest payments, the income will be 26,517 thousand rubles.
Therefore, when choosing a deposit, it is necessary to pay attention not only to the “high rate”, but also to additional conditions. For example, such as the possibility of replenishment or the procedure for paying interest in case of early termination. For example, in case of early withdrawal of a deposit, the accrued interest on it, according to the terms of the agreement, can be paid to the client in full, in part, or be withheld from the deposit amount.
As a result, in order to understand which option is right for you, you need to calculate the yield for the period of placement of funds for each deposit (this can be done using online calculators presented on the websites of most banks), as well as determine the additional conditions that you would like to see in your contribution.
The real wage is a term used among accountants and economists . In our article, the reader will find information about what it is, about the procedure for calculating its size, as well as about the differences from nominal wages.
What does an increase in real wages mean?
Real wages are the amount of goods and services that a worker can purchase with the money he receives as earnings after deducting all taxes.
The remuneration of a working citizen is made by issuing him a nominal wage, which acts as a monetary equivalent of the efforts made by him to achieve a certain result. The nominal wage is not tied to the current price level and does not increase in proportion to their growth. Same size real wage is takes into account and varies depending on fluctuations in the cost of goods in the market.
In the event that the amount of money received by the worker does not change, and the inflation rate rises, real wages will decrease, while the nominal income of the worker does not change. Moreover, real wages may also fall if nominal wages rise - such a development of events is possible if the rate of inflation growth exceeds the rate of increase in wages.
Growth in size is the main sign of improving the standard of living of citizens, their well-being and purchasing power.
What is real wages and how is it determined?
In order to understand how to calculate real wages, it is necessary to have information on the amount of nominal earnings, as well as the value of the consumer price index established by the Federal State Statistics Service for the period for which the calculation is made.
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Zr \u003d Zn / CPI,
Зр - the size of the real salary;
Зн - the size of the nominal salary;
CPI is a consumer price index, the value of which is determined by the Federal State Statistics Service in accordance with the methodology established by the Decree of the State Statistics Committee of the Russian Federation “On the Approval of the Basic Provisions ...” dated March 25, 2002 No. 23.
At the state level, the size of real wages is determined in order to identify crisis phenomena in the economy that have a negative impact on the citizens of the country, and the subsequent search for solutions to get out of this situation. At the level of a single enterprise, such an analysis can be carried out to assess the level of remuneration of employees and the possible search for reserves to increase it.
So the size real wage is an indicator that reflects the purchasing power of a citizen, that is, the volume of goods and services that he can purchase with the nominal wages he receives.
One of the reasons why the stock market is not of interest to most investors, it seems to me, is the uncertainty of what an investor can get from investing his capital in this specific segment of the financial market. Such uncertainty scares off the investor, and sometimes it can even cause some suspicion to the advertising of professionals about the profitability of the stock market.
Let's try to figure out what kind of profitability a person who buys securities on the stock market can expect. The first thing that is shown to a client who comes for a consultation at the office of a broker or management company is a change in the value of a share of one of the funds or a change in one of the stock indices: RTS or MICEX for the past period. Can these numbers be used to determine market returns?
Let's try to check this. To summarize all the data on changes in the value of shares of different funds, for example, we will use only the RTS stock index. And we will consider its values as the cost of a share of a conditional index fund. Recall that to calculate this instrument, the value of shares of 50 companies included in it in different proportions is used.
In the table above, you can see the values of the RTS index at the beginning and end of each year, and the price change in percent. The period under review is taken from the beginning of 1996 and the end of 2008. If we add the resulting change figures with a simple mathematical operation and try to find the average value, then we will get a rate of 46.84%.
It is worth repeating once again that it is these figures that can be found as confirmation of the profitability of the stock market in various advertising booklets of various investment companies. impossible to meet.
Is it possible to focus on this figure and take it as the average return of the stock market? If you ask the same specialists about this, then for the most part, we get the answer “Yes”. But then, of course, the meaningful phrase will sound: "Past results are no guarantee of future results."
And in order to finally protect himself from further claims from the client, he will be offered to sign a paper where he is warned about this and will not have a claim if the market yield deviates from this average value and the client incurs losses by selling his securities at an unfavorable moment .
The purpose of my article is not to accuse anyone of intentional or not cheating, but to show what can be considered the actual profitability of the stock market and what numbers to focus on for a non-professional investor in the future. I foresee the question, why not use the figure of 46.84% as the average return on the market. Moreover, from a mathematical point of view, everything seems to be correct. So not so.
From the lessons of mathematics in elementary school, most of us are familiar with such exercises as checking the answer by reverse action. If the answer is correct, then checking the solution should confirm this. If the figure of 46.84% is correct, and if the initial capital is increased by this figure each year, then the index value at the end of 2008 should be obtained.
In the table presented above, I present the values of the calculations for the entire period. At the end of the billing period, we get the value 12,889.61. Where is the mistake? Why is such a figure obtained, and not 631.89. Of course, I am not strong in mathematics, but it becomes obvious to me that the number 46.89 was not found correctly. And if so, then it cannot be used to demonstrate past stock market returns.
What is more suitable for this purpose? In my opinion, it would be more correct to use such a value as the capitalization ratio or the compound interest rate. What does it mean? Imagine that we place 100 rubles of our capital in some financial instrument with a fixed income at 10% per annum, such as a bank deposit.
At the end of the term, we receive an income of 10 rubles, which we then add to the initial capital of 100 rubles. We receive capital of 110 rubles, which is then invested by us again on the same conditions at 10% per annum. At the end of the second term, the income is already 11 rubles, which is again added to the capital of 110 rubles. We get a capital of 121 rubles. If this is repeated for 10 years, then at the end of the term our capital will increase to the amount of 259.37 rubles.
In the example above, the interest rate we applied is 10% per annum, which would be the capitalization ratio or compound interest rate. You can find it on the stock market, using a simple formula for calculations:
Where Р n - the end of the period, Р - the beginning of the period, n - number of years.
Substituting the digital values of the RTS index, as the beginning of the period 87.35 and the end of the period 631.89, the period of the number of years, we use the number 13. We get the rate value of 16.44%. We get confirmation of the correctness of the found answer.
Now, what does this 16.44% rate of return mean? This means that if we had invested money in one share of the index fund at the beginning of 1996, having bought it for 87.35 rubles, then at the end of 2008 the value of the share would have grown to 631.89 rubles. Such a rate, if desired, can be easily compared with the profitability of the same bank deposit for the same period.
Do not forget that the stock market is still not a bank deposit and there really is no guaranteed return. And in different periods, the yield of the stock market changes and shows different results.
If you are interested in independently calculating the compound interest rate, using the formula presented above, then you can download a simple table on my website in which you can carry out the necessary calculations, only by substituting the necessary values. There is also a table in which the reverse action of checking the calculations is carried out.