FV when compounding occurs every 30 months


A

AdmiralAJ

I'm trying to figure out a way to use the FV function to calculate the compounding of interest every 30 months (every 2.5 years) instead of monthly or annually. Anyone know of a good solution?

AJ
 
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J

joeu2004

AdmiralAJ said:
I'm trying to figure out a way to use the FV function to
calculate the compounding of interest every 30 months
(every 2.5 years) instead of monthly or annually.
Anyone know of a good solution?

It would be helpful if you provided a concrete example.

The units for the nper (2nd) parameter can be anything you wish, so long as
the interest rate (1st parameter) and periodic payment (3rd parameter) are
stated for the same units.

Usually we have an annual interest rate. It can be converted to a 30-month
interest rate either by 30*annualRate/12 or by 30*(1+annualRate)^(1/12)-30,
depending on how the interest rate was stated in the first place. That
might depend on region. For example, the first form is for the US (and NZ
and AU, I believe), and the second form is for the EU (and UK, I believe).

If your payment is monthly, the 30-month payment is simply 30*monthlyPmt.
 
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M

Michael Marshall

I'm trying to figure out a way to use the FV function to calculate the compounding of interest every 30 months (every 2.5 years) instead of monthly or annually. Anyone know of a good solution?



AJ

There may be some way of getting it done in Excel using the built-in financial functions [ along with added calculations ] but it will be much easier and simpler to make use of Excel FV function http://tadxl.com/excel_fv_function.html offered by 3rd party add-in TADXL http://tadxl.com/

Using the tadFV function, you will be able to specify the length of the time period as a month and then specify the interest compounding as 30 months.The tadFV function is quite versatile and permits calculation of compound interest with all sorts of compounding periods, day count basis, and time periods of varying lengths. It also allows for annuity payments that grow, shrink, increase and decrease by a geometric or scalar gradient. These options are exclusive to tadFV function and are not found in Excel's own FV function or other financial functions libraries

Now, if you were to deposit $100 at the start of each month for the next five years where interest of 7% is to be compounded every 30 months or every 2.5 years. The following input will be required to make use of tadFV function to find the compound amount at the end of 5 years.

RATE: 7%
GRADIENT: 0%
TAXRATE: 0%
NPER: 5*12
PMT: -100
PV: 0
TYPE: 1
GTYPE: 0
COMPOUNDING: 30
PERIOD: 1/12
DISTRIBUTION: 1

And you would make the call to tadFV function passing it the values for itsarguments as follows

=tadFV ( 7%, 0%, 0%, 5*12, -100, 0, 1, 0, 30, 1/12, 1)

This will result in a compound amount of $6,613.38 compare this to an amount of $7,201.05 had the interest rate been compounded monthly using the following function call

=tadFV ( 7%, 0%, 0%, 5*12, -100, 0, 1, 0, 1/12, 1/12, 1)
 

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