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- PV, Annuity, Lump Sum

Subject: | PV, Annuity, Lump Sum |

Posted by: | ibvalenti…@hotmail.com |

Date: | Fri, 4 Jul 2008 |

I am looking at John Walkenbach's Excel 2007 Formulas. On page 302, he

has the result of a formula that I think is an error. I am not

confident enough to be sure. In fact, my answer doesn't look right.

The formula is based on the following scenario:

Your brother-in-law wants you to invest in his carpet cleaning

business. If you'll invest $50,000 now, he will pay you $200 per month

for five years and also pay you $60,000 at the end of the five years.

Are you making a good investment?

Here are the arguments:

Rate: 0.8%

Period: 60

Payment: $200

FV: $60,000

Type: 1

Walkenbach's answer: $45,958.83 based on this formula: =PV(0.8%, 60,

200, 60000, 1)

My answer: $69,309.80 based on this formula: =PV(0.8%/12, 60, 200,

60000, 1)

The difference between the two answers is in the first argument. I

can't understand why you do not divide the rate by 12 since we are

dealing with monthly payments.

Thanks

- Re: PV, Annuity, Lump Sum posted by ibvalenti…@hotmail.com on Fri, 4 Jul 2008
- Re: PV, Annuity, Lump Sum posted by Bruno Campanini on Sat, 5 Jul 2008