College Savings Spreadsheet
April 28th, 2007
Question: Help with excel! (FV formula)?
I know what the FV function is and does on Excel, but for this problem I’m supposed to use it, and it doesn’t make sense. What formulas would I put in the spreadsheet?
Slash decides to start a college savings account for his newborn son. He wants to have $140,000 available for him when he is 18, and he expects the account to have an average return of 7%. How much does he need to deposit each month to reach this goal?
Answer: You would use the PMT function, not FV.
Rate = 0.07/12
Nper = 18*12
PV Leave Blank
FV = -140000 (make sure to include the minus sign)
Type = The question doesn’t say whether the deposits will be made at the beginning or ending of each month. If you assume that the deposits start as soon as the son is born, then they are made at the beginning of each month and you would enter a 1. If the deposits are made at the end of each month you will leave it blank. So depending on which method you use, the answers would be:
$323.15 Beginning of the month deposits
or
$325.04 End of the month deposits
Authors@Google: Ramit Sethi
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