Tricky FV function
On Wed, 30 Nov 2005 22:02:33 -0600, davidm
wrote:
I agree with Ron's handling of the first 2 parts of the question. You
can double-check your results with the following approach:
The FV of $500 p.a. at 10% p.a. interest (compounding monthly) for 30
years is calculated as follows:
FV= ((Amt of $500 over 30years*12 months @ 10%/12)-1)/10%/12
=500*((((1+(0.1/12))^30*12)-1))/(0.1/12)
=$86,3541.09
The 3rd part is easier with a spreadsheet layout:
The 3% increments will produce a cash flow of:
1st year 12 monthly instals.: 500 *(1.03)^0-500 = 0
2nd year 12 monthly instals.: 500*(1.03) ^1-500 per month
3rd year 12 monthly instals.: 500*(1.03)^2-500 per month
Not sure where you're getting your values.
For the 2nd part:
$500 monthly at 10% for 30 yrs:
=FV(10%/12,30*12,-500)
=$1,130,243.96
The third equation effectively invests each years increment for n years, where
n decreases depending on the year involved. So there is $15 invested monthly
for 29 years, and so forth. Part 3 comes to about $333,000
This can be checked by setting up a column for each year, and using a formula
that invests the amount for one year, but adds the value of the previous years
computation as the PV for the current year.
so
A1: 500
B1: =A1*1.03
A2: =FV(10%/12,12,-A1)
B2: =FV(10%/12,12,-B1,-A2)
Then copy/drag A2&B2 across for a total of 30 years and the value in AD2 is, as
it should be, the sum of my formulas of Part 2 and Part 3
--ron
|