Finance gurus - how come this isn't working? Little help :)

[Al Neri]

Can someone explain this to me?

I want to invest a steady stream of income from the day my child is born then every birthday until they are 17 - so I can pay for their first year of college which will be 60,000. n.b. i am estimating a 10% return.

i set up a timeline

1---17 would have a steady payment, then the 18th birthday i want 60,000, so that would mean I'd want to have 54,545.4545454 by their 17th birthday. So I do:

Rate=10%
nper=18
pv=0
FV=-54545.5454545454
type=1 (payments are distributed at the beginning of each period)

=PMT(10%, 18, 0, -54545.45454545454, 1)

to which I get 1,087.4490358

Now, when i expand out the math, I get @ the 17th birthday 53,995.8066617... why am i ~500$ short?

no dumb answers like you bought some clothes with it :thumbsup:

Thanks!

 

[krunchykrome]

I dont know.

Just do it the easy way. Use PV/FV tables.

The answer is: You want to invest $11,870.xx the day she is born.

This answer is based on the following conditions.

i=10%
n=17
Interest is compounded annually

 

[KLin]

Order of operations. Make sure you're adding the values from period to period before tacking on the interest.

In excel, I populated Column A with 18 rows of 1087.449

In column B, I put "=A1*(1.1)" for the first row. Every row after that in column B I used "=(A1+B2)*(1.1)" where the row value increment by one.

 

[Al Neri]

Originally posted by: krunchykrome
I dont know.

Just do it the easy way. Use PV/FV tables.

The answer is: You want to invest $11,870.xx the day she is born.

This answer is based on the following conditions.

i=10%
n=17
Interest is compounded annually

Did you read the question?

a steady stream (not lump sum) of payments from the birth to the 17th birthday. 0 to 17 inclusive would make n=18



Thanks

 

[krunchykrome]

Originally posted by: Don Rodriguez

Originally posted by: krunchykrome
I dont know.

Just do it the easy way. Use PV/FV tables.

The answer is: You want to invest $11,870.xx the day she is born.

This answer is based on the following conditions.

i=10%
n=17
Interest is compounded annually

Did you read the question?

a steady stream (not lump sum) of payments from the birth to the 17th birthday. 0 to 17 inclusive would make n=18



Thanks

Sorry, Im a little confused with the question.

 

[Viper GTS]

I just googled & grabbed the first investment calculator, starting balance of $0, 18 year investment period. $100 a month will put you over $60K assuming 10% annual interest.

Your monthly deposit for 18 years of $ 100.00 for an interest rate of 10.000 % compounded annually with an initial amount of $ 0.00:


Year Balance
0 $ 1,256.56
1 $ 2,644.69
2 $ 4,178.18
3 $ 5,872.25
4 $ 7,743.71
5 $ 9,811.13
6 $ 12,095.04
7 $ 14,618.11
8 $ 17,405.37
9 $ 20,484.50
10 $ 23,886.05
11 $ 27,643.79
12 $ 31,795.01
13 $ 36,380.92
14 $ 41,447.03
15 $ 47,043.64
16 $ 53,226.28
17 $ 60,056.32


Final Savings Balance: $ 60,056.32

Viper GTS

 

[Ns1]

TV5 says

1345.32 deposited 17 times will net you 54545.58 + 5454.42 in interest on the last year, for a total of 60k

 

[Ns1]

Compound Period: Annual

Nominal Annual Rate: 10.000%


CASH FLOW DATA

Event Date Amount Number Period End Date
1 Deposit 10/2/2007 1,345.32 17 Annual 10/2/2023
2 Withdrawal 10/2/2024 60,000.00 1


AMORTIZATION SCHEDULE - Normal Amortization

Date Deposit Withdrawal Interest Net Change Balance
Deposit 10/2/2007 1,345.32 1,345.32 1,345.32
2007 Totals 1,345.32 0.00 0.00 1,345.32

Deposit 10/2/2008 1,345.32 134.53 1,479.85 2,825.17
2008 Totals 1,345.32 0.00 134.53 1,479.85

Deposit 10/2/2009 1,345.32 282.52 1,627.84 4,453.01
2009 Totals 1,345.32 0.00 282.52 1,627.84

Deposit 10/2/2010 1,345.32 445.30 1,790.62 6,243.63
2010 Totals 1,345.32 0.00 445.30 1,790.62

Deposit 10/2/2011 1,345.32 624.36 1,969.68 8,213.31
2011 Totals 1,345.32 0.00 624.36 1,969.68

Deposit 10/2/2012 1,345.32 821.33 2,166.65 10,379.96
2012 Totals 1,345.32 0.00 821.33 2,166.65

Deposit 10/2/2013 1,345.32 1,038.00 2,383.32 12,763.28
2013 Totals 1,345.32 0.00 1,038.00 2,383.32

Deposit 10/2/2014 1,345.32 1,276.33 2,621.65 15,384.93
2014 Totals 1,345.32 0.00 1,276.33 2,621.65

Deposit 10/2/2015 1,345.32 1,538.49 2,883.81 18,268.74
2015 Totals 1,345.32 0.00 1,538.49 2,883.81

Deposit 10/2/2016 1,345.32 1,826.87 3,172.19 21,440.93
2016 Totals 1,345.32 0.00 1,826.87 3,172.19

Deposit 10/2/2017 1,345.32 2,144.09 3,489.41 24,930.34
2017 Totals 1,345.32 0.00 2,144.09 3,489.41

Deposit 10/2/2018 1,345.32 2,493.03 3,838.35 28,768.69
2018 Totals 1,345.32 0.00 2,493.03 3,838.35

Deposit 10/2/2019 1,345.32 2,876.87 4,222.19 32,990.88
2019 Totals 1,345.32 0.00 2,876.87 4,222.19

Deposit 10/2/2020 1,345.32 3,299.09 4,644.41 37,635.29
2020 Totals 1,345.32 0.00 3,299.09 4,644.41

Deposit 10/2/2021 1,345.32 3,763.53 5,108.85 42,744.14
2021 Totals 1,345.32 0.00 3,763.53 5,108.85

Deposit 10/2/2022 1,345.32 4,274.41 5,619.73 48,363.87
2022 Totals 1,345.32 0.00 4,274.41 5,619.73

Deposit 10/2/2023 1,345.32 4,836.39 6,181.71 54,545.58
2023 Totals 1,345.32 0.00 4,836.39 6,181.71

1 10/2/2024 60,000.00 5,454.42 54,545.58- 0.00
2024 Totals 0.00 60,000.00 5,454.42 54,545.58-

Grand Totals 22,870.44 60,000.00 37,129.56 0.00



Last interest amount decreased by 0.14 due to rounding.

 

[Epic Fail]

You miscalculated during the expansion, 1087.45 gets you 60k.

Even rounding down to 1087 gets you 54522.93 and not 500 off.

 

[WildHorse]

Use this calculator, which uses the right formulas:

Finance Calculator Version 4.0 ? P. Lutus

 

[alrocky]

Originally posted by: scott
Use this calculator, which uses the right formulas:

Finance Calculator Version 4.0 ? P. Lutus

Bookmarked that calc. Thanks scott!

Weird that there as so many different answers here.

 

[Ilikepiedoyou]

You can use a Sinking Fund Factor

A=how much should be invested at the end of each period
i=interest
n=years

A=F(i/(x-1)) where x = (1+i)^n

F is the amount you want to reach after n periods at interest rate i

if you are putting money in daily, divide i by 12 and multiple n by 12