PV, Annuity, Lump Sum

Giganews Newsgroups
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

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