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Investment FV
Hypothetically I want to save $500 per month into an investment portfolio that earns 10% What is the future value after 30 years? The real issue is...do I compound interest monthly or annually? Remember, lets call this investment a collection of funds in a portfolio. So I'm sure the difference in compounding methods would be pretty significant. Which would be more accurate? I'd be curious to see an FV function solution and a non-array solution if anyone has the talents. Thanks! -- MPuser |
#2
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Investment FV
The functions are pretty easy. If interest is compounded monthly:
=FV(10%/12,30*12,-500,,1) If compounded annually: =FV(NOMINAL(10%,12)/12,30*12,-500,,1) Which one is right is, as you say, hypothetical. In my opinion, compounded annually is the more accurate formula. -- Regards, Fred "MPuser" wrote in message ... Hypothetically I want to save $500 per month into an investment portfolio that earns 10% What is the future value after 30 years? The real issue is...do I compound interest monthly or annually? Remember, lets call this investment a collection of funds in a portfolio. So I'm sure the difference in compounding methods would be pretty significant. Which would be more accurate? I'd be curious to see an FV function solution and a non-array solution if anyone has the talents. Thanks! -- MPuser |
#3
Posted to microsoft.public.excel.worksheet.functions
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Investment FV
"MPuser" wrote:
Hypothetically I want to save $500 per month into an investment portfolio that earns 10% What is the future value after 30 years? The real issue is...do I compound interest monthly or annually? You would compound each investment in the portfolio at the frequency appropriate for that investment. I assume you tookthat into account when you say that total portfolio annual return is 10%. In that case, you can approximate the total portfolio growth by computing the monthly rate that compounds to 10% annually. Thus, the monthly rate is RATE(12,,-1,1.1) -- which is the same as NOMINAL(10%,12)/12. So the future value after 30 years would be FV(RATE(12,,-1,1.1),12*30,-500,,1). |
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