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1. Hi All,

I am having a lot of difficulty with a PV function. I have the following info:

Col A Col B
Total Annual Contribution \$2,480
Amount at Retirement \$837,948
Annuity Amount (annual) \$85,308

Employee Contribution 6.2%
Employer Contribution 6.2%
Years Contributing 40
Return on Investment 9.0%
Years of Annuity 25
Taxable Earnings \$20,000

I want to calculate the annuity amount (\$85308) and have been told it is done using the PV function. I get:

=PV(B12,B13,B4,-B5) i.e.
=PV(.09,25,2480,-837948) = \$72,815.07

What am I doing wrong here ??????

Pete

2. Pete,

I suggest you are using the wrong formula.

The PV is the \$837,948, rate is 9% and there are 25 payments. You want to calculate the value of each of those payments right?

This could be thought of as you giving someone a loan of \$837,948 and them paying you back 25 payments @ 9%.

Consider using the PMT function.

=PMT(9%,25,-837948)

which gives you the desired result.

Hope this helps,

RET79

3. Even better.....

I think you mixed up two calculations here.

The first one is finding the future value of 40 annual payments of \$2480, which gives you \$837848

This can be calculated by using

=FV(9%,40,2480) = -\$837848

In fact, you can combine your whole question in one formula, if you substitute the FV formula instead of -\$837848 in the other calc, giving you:

=PMT(9%,25,FV(9%,40,2480)) = \$85,308.39

Hope this helps,

RET79

[ This Message was edited by: RET79 on 2002-04-28 07:08 ]

4. Thanks Ret,

That's great !!!

: )

Pete

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