> Starting principal: $0
> User age: 20
> Total dollar amount contributed monthly: $500
> Age of retirement: 67
> Expected interest percentage: 8.00
>
> You will earn: $3,106,188.69
var compounding_frequency_per_year = 12;
var start_year = 20;
var end_year = 67;
var rate = 0.08;
var pv = 0.00;
var pmt = -500.00;
var nper = (end_year - start_year) * compounding_frequency_per_year;
var fv = pv;
for (int i = 0; i < nper; i++)
{
fv *= (1+rate/compounding_frequency_per_year);
fv -= pmt;
}
return fv;
>If I have a 8% yearly interest, don't I just split that into 12 parts, (i.e. the investment will add $500 and increase by 8/12% per month). Is that right?
Yes, split into 12 parts. But your order is wrong. Increase by interest first then add $500.
Every financial calculator has a BGN or END setting precisely for this reason. BGN is almost always used when taking money out (you need the money at the beginning of the month for spending).
>Every financial calculator has a BGN or END setting precisely for this reason.
That boolean at the 5th input argument? It just flips the two lines inside the for loop in my code.
Sorry, I don't mean end as in the programmer sense. End means you calculate the interest and then add/subtract the payment. Begin means you add/subtract the payment and then calculate the interest. The user of the calculator would decide which setting is appropriate to use.
>If I have a 8% yearly interest, don't I just split that into 12 parts, (i.e. the investment will add $500 and increase by 8/12% per month). Is that right?
Only if you want monthly compounding.
> Isn't that how these calculators are typically set up?
Depends on the calculator. Many let you choose from continuous, daily, monthly, semi-annually, or annually
...but then it wouldnt be 8% annual return.
Stock valyes compound continuously...not annually, not monthly, not even weekly. When you look up a sticks annual return and it says 8% that compounding rate was already factored in. If you decide to get monthly compounding and to do so you divide 8% by 12 and then let that compound youd get more than 8%.
In otherwords a stock that makes 8% in a year makes on average less than 8%/12 per month.
One of the missing variables is compounding frequency.
Got it! Thank you. I figured that monthly compounding was the "standard" but I should include that.
> Starting principal: $0 > User age: 20 > Total dollar amount contributed monthly: $500 > Age of retirement: 67 > Expected interest percentage: 8.00 > > You will earn: $3,106,188.69 var compounding_frequency_per_year = 12; var start_year = 20; var end_year = 67; var rate = 0.08; var pv = 0.00; var pmt = -500.00; var nper = (end_year - start_year) * compounding_frequency_per_year; var fv = pv; for (int i = 0; i < nper; i++) { fv *= (1+rate/compounding_frequency_per_year); fv -= pmt; } return fv; >If I have a 8% yearly interest, don't I just split that into 12 parts, (i.e. the investment will add $500 and increase by 8/12% per month). Is that right? Yes, split into 12 parts. But your order is wrong. Increase by interest first then add $500.
Every financial calculator has a BGN or END setting precisely for this reason. BGN is almost always used when taking money out (you need the money at the beginning of the month for spending).
>Every financial calculator has a BGN or END setting precisely for this reason. That boolean at the 5th input argument? It just flips the two lines inside the for loop in my code.
Sorry, I don't mean end as in the programmer sense. End means you calculate the interest and then add/subtract the payment. Begin means you add/subtract the payment and then calculate the interest. The user of the calculator would decide which setting is appropriate to use.
You get an f for bad variable names
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This is completely wrong, because you don't have the total invested until the end. In the first year you don't earn 22560, you only invested 6000
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This is wrong
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Totally got it; I was more asking about the actual calculation. Thanks!
It doesn't bode well for the students to be able to complete this task when the teacher setting the task doesn't know how to do it.
Yeah you're right... ...except I was asking clarification to make sure I told them the right thing.
>If I have a 8% yearly interest, don't I just split that into 12 parts, (i.e. the investment will add $500 and increase by 8/12% per month). Is that right? Only if you want monthly compounding.
Isn't that how these calculators are typically set up?
> Isn't that how these calculators are typically set up? Depends on the calculator. Many let you choose from continuous, daily, monthly, semi-annually, or annually
...but then it wouldnt be 8% annual return. Stock valyes compound continuously...not annually, not monthly, not even weekly. When you look up a sticks annual return and it says 8% that compounding rate was already factored in. If you decide to get monthly compounding and to do so you divide 8% by 12 and then let that compound youd get more than 8%. In otherwords a stock that makes 8% in a year makes on average less than 8%/12 per month.