Question for Math/Finance guys

[albionmoonlight]

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]

http://www.ici.org/cgi-bin/calcs/SAV14.cgi/investment_company_institute

[wade moore]

DOLA:

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

[wade moore]

http://personal.fidelity.com/toolbox/growth/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]

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]

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]

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

[Alf]

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

[Radii]

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

http://www.fool.com/calcs/calculators.htm?source=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 :(