Question for Math/Finance guys

albionmoonlight · 05-18-2005, 06:32 AM

I want to invest X dollars every year for Y years at G% annual growth with I% expected inflation to end up with T dollars (in today's terms) at the end of the investment period.

What equation do I use?

wade moore · 05-18-2005, 06:52 AM

http://www.ici.org/cgi-bin/calcs/SAV...pany_institute

wade moore · 05-18-2005, 06:53 AM

DOLA:

Crap, nevermind, not what I thought it was...

wade moore · 05-18-2005, 07:03 AM

http://personal.fidelity.com/toolbox...h/growth.shtml

This sort of gets you what you want. However, you might have to trial and error. There is no option for "I want to have X Dollars at the end"... you set the Initial balance, years, interest rate, inflation rate, and annual investment.

moriarty · 05-18-2005, 07:51 AM

edit - never mind, misread the question.

I think you can get by with:

Value you want = X + X(1+i)^1 + X(1+i)^2 + X(1+i)^3 .... + X(1+i)^y.

To account for inflation, take your anticipated growth (G) minus the expected rate of inflation (1%) to come up with your true growth (i).

moriarty · 05-18-2005, 08:36 AM

Dola:

The equation used in the link Wade posted is probably more accurate. It's basically:

X*Z * [Z^0+Z^1+Z^2+...Z^n-1]

Where X = payments
Z = (1+G)/(1+i) => G = growth %, i = inflation %
n = number of years

Note: this assumes you invest at the beginning of the year, and neglects the time value of money other than inflation.

mhass · 05-18-2005, 09:07 AM

For more help, search for the term "simple annuity" and beware of the use of negative numbers in the correct places (payments/contributions).

Alf · 05-19-2005, 03:13 AM

So, what is the answer ? What is X ? Tell me, tell me !

Radii · 05-19-2005, 08:52 AM

If you're looking for a calculator online to do this for you:

http://www.fool.com/calcs/calculator...urce=LN#saving

How much will my savings be worth is a good one.

How much will it take to save for a vehicle, home, etc lets you put in an end goal.

If you actually want the mathematical equation behind it... i'm not that smart anymore

05-18-2005, 07:51 AM	#5
moriarty College Starter Join Date: Nov 2000 Location: A negative place	edit - never mind, misread the question. I think you can get by with: Value you want = X + X(1+i)^1 + X(1+i)^2 + X(1+i)^3 .... + X(1+i)^y. To account for inflation, take your anticipated growth (G) minus the expected rate of inflation (1%) to come up with your true growth (i). Last edited by moriarty : 05-18-2005 at 07:57 AM.

05-18-2005, 09:07 AM	#7
mhass High School Varsity Join Date: Jan 2004 Location: Here	For more help, search for the term "simple annuity" and beware of the use of negative numbers in the correct places (payments/contributions). __________________ Now while I wasn't able to cut everyone I wanted to, I have cut a lot of you. - H.J.S.

05-19-2005, 03:13 AM	#8
Alf Pro Starter Join Date: Jan 2001 Location: Rennes, France	So, what is the answer ? What is X ? Tell me, tell me ! __________________ FOFL - GML - IHOF - FranceStats

05-18-2005, 08:36 AM	#6
moriarty College Starter Join Date: Nov 2000 Location: A negative place	Dola: The equation used in the link Wade posted is probably more accurate. It's basically: XZ [Z^0+Z^1+Z^2+...Z^n-1] Where X = payments Z = (1+G)/(1+i) => G = growth %, i = inflation % n = number of years Note: this assumes you invest at the beginning of the year, and neglects the time value of money other than inflation.

05-19-2005, 08:52 AM	#9
Radii Head Coach Join Date: Jul 2001	If you're looking for a calculator online to do this for you: http://www.fool.com/calcs/calculator...urce=LN#saving How much will my savings be worth is a good one. How much will it take to save for a vehicle, home, etc lets you put in an end goal. If you actually want the mathematical equation behind it... i'm not that smart anymore

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)