Future Value/SIP Calculators Question

POSTED BY Bond Bhai ON January 9, 2013 4:22 pm COMMENTS (3)

Hi,

 

  I was just trying out some “math” and trying to arrive at some figures. However, i got confused and not sure if was doing it right! Can you please help me out?

 

1. Finding a Future Value of Current Expense.

 

Assume that i have an expense of 2Lakhs per year, Then how much would it be considering – 

 

Inflation: 8%

Number of Years to Retire : 25

Present Value : -200000 (-ve so that i get a positive value in excel)

 

Future Value =FV(8%,25,,-200000). I get a value of 13,69,695.04. So a Expense of 2L will be 13.6L after 25 years. Is this correct?

 

2. Assuming i would need the above value (13.6Laks) for 10 Years, what is the corpus required? Considering

 

Real Rate of Return = (Rate of Return/Rate of Inflation) – 1 * 100

I Considered, Rate of Return = 10%, Inflation = 8%, so real rate of return = 1.85%

 

So Corpus Required = FV(185/100, 10, 13,69,695.04,,1). I got a value of 1,51,72,459.78. Around 1.5Crore. So i would need a corpus 1.5Crore then it would last me 10 years while withdrawing 13.6Lakhs per year. Is this right?

 

3. How much do i need to SIP to generate a corpus of 1.5Crore.

Assuming Rate of Return = 12%

Years of Investment = 25

Corpus Required = 1,51,72,459.78

 

Using Excel, =PMT(12%/12, 25*12, ,-1,51,72,459.78). I got a value of 8,075.41. This is the amount i need to SIP every month. Is this correct?

 

4. Finally, I tried to verify if this correct using the FV forumla in Excel, 

=FV(12%, 25, 8075.41*12). This is to check if can generate a Corpus of 1.5Cr assuming i SIP 8K per month of the next 25 years with a Rate of return = 12%. I got a value 1,29,20,710.52. Which is like 30Lakhs short of 1.5Cr!! 

 

What am i doing wrong here? Any help please! Am i even doing it right or is the whole thing a waste of time?

 

3 replies on this article “Future Value/SIP Calculators Question”

  1. ashalanshu says:

    Dear Govind, the original jagoinvestor book has been renamed and already purchased by you. 🙂

    thanks

    Ashal

  2. govindtruptee says:

    Dear Sir,

    I have ordered following three books from flipkart today. I also want to buy
    jago investor, please help as it is out of stock. Please also send me the time value of
    money calculator in excel.

    11 Principles to Achieve Financial Freedom: Master Your Financial Life 3
    Will be delivered by Saturday, 30th Nov’13
    Rs. 410

    16 Personal Finance Principles Every Investor Should Know
    Will be delivered by Saturday, 30th Nov’13
    Rs. 410

    How to be Your Own Financial Planner in 10 Steps: Master Your Financial Life 2
    Will be delivered by Saturday, 30th Nov’13

    Rs. 410
    Item Price: Rs. 410
    Shipping Charge FREE
    Total Rs. 1230

  3. 1. for inflation
    FV(inflation,years,0,-present value) so what you did is right

    or FV = PV*(1+inflation)^years

    2. I think this is where you made the mistake
    net return = (1+return)/(1+inflation) -1

    corpus =PV(net return, years,-FV,,1)

    3. PMT(return/12,years*12,,-corpus)

    If you send me an email I can send you a calculator where this is nicely explained

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Download Our FREE Ebook!

Available only for first 100 people today

Download Our FREE Ebook!

Available only for first 100 people today