Wednesday

April 23, 2014

April 23, 2014

Posted by **Ms. Renee** on Tuesday, July 11, 2006 at 11:49pm.

An EXCEL spreadsheet will be helpful for these types of calculations.

Let S1 be savings in year 1, S2 in year 2, and so on. (For now, unless you have been othewise instructed, assume annual savings is received on the last day of the year.) Let r be the interest rate.

First, calculate the nominal amount of cash that will be there after 8 years.

T = S1*(1+r)^7 + S2*(1+r)^6 ... S8(1+r)^0

Now deflate T by 8 years of annual discounting at rate d. PV = T/(1+d)^8 Since you did'nt specifiy a discount rate d, assume d=r.

Thanks! That is much easier!

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