Compound Interest Future Value

[JPatel0592]

What is the formula that I would use to calculate the following:

$2000 gift received from father
My age is 15 years.
My assumed rate of return is 10%.
For next 50 years, I put $1200/year.
I start this saving plan January 1996.
After 50 years, I would have deposited $60,000 + $2,000 gift from my
father.
Can you assist me with a formula which will calculate my future value?

I have done this on Lotus and I find it very interesting and my answer is
this:
my investment of $62,000 turns into $1,771,140.96. I want to verify if
this is accurate information.

[Tim Constantine]

JPatel0592 wrote:
>
> What is the formula that I would use to calculate the following:
>
> $2000 gift received from father
> My age is 15 years.
> My assumed rate of return is 10%.
> For next 50 years, I put $1200/year.
> I start this saving plan January 1996.
> After 50 years, I would have deposited $60,000 + $2,000 gift from my
> father.

There is two formulas that you have to use, one to calculate the future
value of the lump sum:

(1 + k)^n

and one to calculate the future value of the annuity:

(1+k)^n-1/k

where k is the interest rate (10%)

and n is the number of periods (50)

Take the result of these to formulas and add them together to get your
final result.

--
Tim Constantine

[Tim Constantine]

I didn't explain that quite right...

Actually these two formulas calculate the future value of $1.

To get the final result, you would multiply the first formula's result by
$2000 and the second formula's result by $1200, then add them together.

Also, if the $1,200/year was invested at a rate of $100/month k would be
.1/12 and n would be 600. This would significantly enhance your future
value.

--
Tim Constantine