Canadian Money Forum banner

1 - 2 of 2 Posts

·
Banned
Joined
·
1 Posts
Discussion Starter #1
Hi, I need a formula for use in an Excel spreadsheet to compute the starting principal for annuity payments, detailed as follow: Thanks you. Paul

GIVEN:
i = Annual interest rate = 7%
n = years to pay out = 20 years
annuity payment type = end of year
g = inflation rate = 3%
first payment = 64,000​

want: p = starting principal
 

·
Registered
Joined
·
5,464 Posts
This is a time value of money problem. You can use Excel like a financial calculator to complete the calculation.

Here is a tutorial which should explain how to do this:

http://www.tvmcalcs.com/calculators/excel_tvm_functions/excel_tvm_functions_page2

Your inflation figure is a bit of a red herring. Because you have specified both an interest rate and an inflation rate, you can produce a single rate (for the "rate" entry in your formula) which takes both into account (unless you want to compound interest and inflation at different periods, which would be crazy).

In terms of terminology, this is a regular annuity calculation (as opposed to an annuity due) and you are looking for the present value.
 
1 - 2 of 2 Posts
Top